-
- Money Morning Staff reports-- April 16, 2013
Monday's drop in gold prices was the largest one-day plunge since February 1983 - which led many of those investing in gold to bail on the yellow metal.
Gold prices tumbled $140.40, or 9.4%, to $1360.60 an ounce. This brought the two-day decline to $203.70, or 13%.
On Friday, we outlined recent factors driving gold's price plunge:
- The Federal Open Market Committee (FOMC) meeting minutes that came out last week suggested the central bank may start scaling back its monetary stimulus measures later this year, reducing inflationary pressures.
- Goldman Sachs Group Inc. (NYSE: GS) last week cut its 2013 average gold forecast, for the second time, to $1,545 from $1,610. Investors like to dump the metal after the release of bearish research.
- There have been rumors financially strapped Cyprus was selling 400 million euros of gold, 75% of its reserves to raise cash.
Gold prices ended the drastic two-day decline Tuesday, up nearly 2% to $1,387.40.
To continue reading, please click here...
-
Every Gold Coin Has Two Sides
- By Frank Holmes, Guest Writer, Money Morning - April 11, 2013
Just as every coin has two sides, every data point that doesn't meet expectations usually has an upside somewhere.
For instance, although gold prices have fallen with the strengthening U.S. dollar, the yellow metal is appreciating in Japanese yen. So when negative news about the economy came out this week, along with the U.S. Labor Department reporting that the country added only 88,000 jobs in March, investors found reasons to be encouraged.
For one, the Federal Reserve is apt to maintain its stimulative easing course and keep interest rates low.
To continue reading, please click here…
-
Does Investing in Gold Top Your List of "Best Investments"?
- By Diane Alter, Contributing Writer, Money Morning
- March 28, 2013
Even though the Dow Jones Industrial Average and Standard & Poor's 500 Index have hit record highs this year, investing in gold remains the top investment pick in CNBC's latest All-America Economic Survey.
The March poll shows the yellow metal is the favored investment choice among 35% of respondents, beating real estate at 27% and stocks at 21%. This is the second year that investing in gold has topped the list of what those surveyed consider the "best investment" to make now.
While survey participants are more optimistic this year than last about the stock market, 21% are uncertain if now is a good time to dabble in stocks, up from 11% in December 2009.
Those who believe the current environment make it a good time to buy stocks jumped from 31% in November to 40%, the highest amount since December 2009.
Moreover, in spite of the improved outlook for stocks, the overall view of the current state of the economy remains bleak. Currently, 60% of those surveyed are pessimistic about the U.S. economy, up from 56% in November.
To continue reading, please click here...
-
In Gold, Not Cyprus, We Trust
- By Frank Holmes, Guest Writer, Money Morning - March 27, 2013
Global investors had to muster the courage to keep calm as news of Cyprus' proposed partial theft of all bank deposits took Wall Street by surprise, closed the country's banks and drove the gold prices higher.
The thoughtless idea was intended to capture a portion of the $31 billion in bank assets held by Russians. According to the Financial Times, Cyprus has developed a "well-earned reputation for being a haven for dirty money from Russia."
Although Cyprus' government came to its senses and blocked the proposed seizure, the damage has been done. To many people around the world, raising income taxes may be one thing, but changing the rules to steal hard-earned savings from all citizens rattles their confidence. What Adrian Ash of BullionVault says is "most amazing" about this situation is that "small savers are no longer sacred."
It's remarkable to see the response from Cypriots, as they protested in the streets, with "NO" stamped on their palms, demanding the government take its hands off their money. It's refreshing to see their pushback to sanity.
How did this tiny island make it into the European Union (EU) in the first place? The Financial Times gave an insightful background:
"Many EU leaders had been deeply reluctant to admit Cyprus into the union in 2004, without a peace settlement that reunified the island. But Greece had threatened to veto the entire enlargement of the EU - blocking Poland, the Czech Republic and the rest - unless Cyprus was admitted. Reluctantly, EU leaders succumbed to this act of blackmail."
To continue reading, please click here…
-
As Cyprus Struggles, Now Is the Time to Buy Gold
- By Peter Krauth, Resource Specialist, Money Morning
- March 25, 2013
I'll bet a few Cypriot bank account holders are paying much closer attention to gold now.
Since the announcement that Cyprus was looking to confiscate up to 10% of bank deposits, gold has risen by up to $24/ounce on safe haven demand.
After all, gold is real wealth, and it's the only asset that's not simultaneously someone else's liability.
Central bankers, even in the West, know this too. As former Federal Reserve Chairman Alan Greenspan once said:
"Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it."
I just hope the irony of that message -- and its messenger -- aren't lost on you.
As for Cyprus, this ongoing crisis has it all. Along with gold, there's debt, energy, intrigue and a long storied history...
To continue reading, please click here…
-
Can Gold Miners Increase Profits Through Spin Offs?
- By Jeff Uscher, Contributing Writer, Money Morning-- March 22, 2013
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.
Other gold majors, including Gold Fields Limited (NYSE: GFI) and Barrick Gold Corp. (NYSE: ABX), have already spun off some of their mines or are in the process of doing so.
To continue reading, please click here...
-
These Gold Stocks Are Poised to Rebound in 2013
- By Tony Daltorio, Contributing Writer, Money Morning
- March 13, 2013
With gold prices - which closed at a nearly two-week high Tuesday to $1,591.70 - rising year after year for much of the past decade, you might think all gold stocks have increased, too.
But they have not - not by a long shot.
In fact, gold mining companies' stocks specifically have lagged the performance of the precious metal for six years.
This sad tale can be seen by looking at the gold miners ETFs. The biggest fund in the sector is the Market Vectors Gold Miners ETF (NYSE: GDX). It holds 31 of the world's top gold mining companies including the likes of Barrick Gold Corp. (NYSE: ABX), Newmont Mining Corp. (NYSE: NEM) and Goldcorp Inc. (NYSE: GG).
It is down more than 20% in the last three months alone. That puts it at its lowest valuation versus bullion prices in over three years. Over the past year, GDX has fallen nearly 32%, which is roughly triple the decline of the largest gold bullion ETF, the SPDR Gold Trust (NYSE: GLD).
It's even worse for the junior miners. The Market Vectors Junior Miners ETF (NYSE: GDXJ) is down roughly 42% of the past 12 months. This ETF focuses on smaller mining companies such as Argonaut Gold and B2Gold and contains 79 stocks.
So what's behind these declines? And when can investors bet on a reversal?
To continue reading, please click here...
-
The Looming Gold Production Cliff That Will Drive Prices Higher
- By Tony Daltorio, Contributing Writer, Money Morning
- February 28, 2013
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.
To continue reading, please click here...
-
A Test of Strength for Gold
- By Frank Holmes, Guest Writer, Money Morning - February 28 2013
When investing in gold, I often say diverse opinions promote critical thinking and a healthy market. I believe elevated groups of buyers and sellers create a competitive tug-of-war in the bid and ask price of the precious metal.
Last week, we saw the gold bears growling louder and gaining strength, as the world's largest gold-backed ETF, the SPDR Gold Trust, experienced its largest one-day outflows since August 2011.
The Fear Trade fled the sector following the Federal Reserve's meeting that revealed a growing dissension among some of its members over the central bank's bond-buying program.
Despite the discord, the Fed is continuing its course to purchase $85 billion of bonds every month and keep interest rates near zero. Ben Bernanke's plan bloating the balance sheet to more than $3 trillion has been keeping the Fear Trade coming back for more metal.
To continue reading, please click here…
-
Why Bill Gross Says You Should Be Investing in Gold
- By Diane Alter, Contributing Writer, Money Morning
- February 4, 2013
Renowned bond investor Bill Gross, the manager of PIMCO's Total Return Fund, the world's largest bond fund, just shared his top investment picks with Barron's. Leading the savvy investor's short and selective list was gold.
Why is a bond bull keen on investing in gold?
It's because Gross sees gold as a stellar inflationary hedge as global central banks attempt to reflate their economies.
Gross explained that while it looks like loose monetary policies and the deluge of dollars will continue for a while, at some point both will have to stop and "when all this money printing by central banks ends, it won't be pretty."
Gross sees trouble brewing in the artificially-priced U.S. Treasury market.
"The Fed is buying 80% of the Treasury market today. It is remarkable to think that when the Treasury issues debt in the trillion-dollar-plus category, the Fed ends up buying most of it. The Treasury sells it to banks and primary dealers, who sell it back to the Fed at a higher bid," Gross explained.
"This is very different from the free-market capitalism we've come to know. And it will continue until inflation exceeds the upper end of the central bank's target of 2.5% or, by some miracle, we get real economic growth," Gross continued.
The artificially priced bonds leave investors to question if investing in them is worth the slender reward, given the paltry yields from a bevy of bonds except high-risk junk bonds.
To continue reading, please click here...
