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.
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.
Two Ways to Go Big on Gold Stocks Right Now
- By Don Miller, Contributing Writer, Money Morning - January 29, 2013
There are plenty of reasons for you to have some gold stocks in your portfolio.
Governments are stockpiling record amounts of the shiny metal. Mints are pumping out new coins as fast as they can. And the Fed under "Helicopter" Ben Bernanke is wallpapering the world with greenbacks, pumping out $85 billion a month until...well, who knows when?
But there's more.
The Europeans have joined the party by bailing out their weak sisters with hundreds of billions of euros.
And the Bank of Japan just announced a $1.2 trillion bond purchase program for 2013 and $150 billion per month after that - almost twice the size of the Fed's folly.
Now the yahoos in Washington are threatening to spill more blood over the debt ceiling.
All this spells big upside for gold prices in 2013...and the companies that produce gold.
Investing in Gold: Don't Ignore this Central Bank Buying Frenzy
- By Tony Daltorio, Contributing Writer, Money Morning - January 25, 2013
But that certainly has changed in recent years.
In 2012, the world's central banks added the most gold to their reserves since 1964. Net official gold purchases added up to 536 metric tons, a gain of 17.4% from the previous year according to a report from Thomson Reuters GFMS. The estimate from the World Gold Council for such purchases is similar at 500 metric tons.
Central banks are forecast by GFMS to purchase 280 metric tons in the first half of 2013 alone.
That's good news for anyone investing in gold.
Four Sensational Facts About Gold Investing That You Might Not Know
Our ever-popular Periodic Table of Commodity Returns has been updated through 2012.
Investor Alert readers love this chart as it shows a decade of results across 14 different commodities, providing strikingly rich information in a very familiar format.
Last year, 11 commodities rose in value, with wheat rising as the top crop after seeing a significant decline in 2011. It was a similar rags-to-riches story for the next few leaders, including lead, zinc, natural gas and platinum, which all climbed double digits in 2012 after falling in 2011.
Only three commodities declined over the year: Crude oil fell by 7% after rising 8% the previous year. Nickel declined for the second year in a row. In 2012, the metal lost 9% and in 2011, nickel fell another 24%.
Coal was the worst-performing commodity in 2012, falling nearly 17%. Coal's been going through a rough spell lately; in fact, the commodity has not been king for five years (although it did record a 31 % increase in 2010).
As you can see from the table, commodities often have wide price fluctuations from year to year given the many factors affecting supply and demand, such as government policies, union strikes, and currency volatility.
That's why when it comes to commodities and commodity producers, many investors "leave the driving" to active money managers who understand these specialized assets and the global trends affecting them.
Take gold and gold companies, for example. After investing in the mining industry for decades, we've taken note of several facts about gold that continue to surprise our investors. Here are four of the latest:
How Will the Debt Ceiling Debate Affect Gold Prices?
- By Diane Alter, Contributing Writer, Money Morning - January 22, 2013
Investment powerhouse Goldman believes gold prices will log impressive gains over the next three months as the debt ceiling debate takes center stage on Capitol Hill. The bank is advising investors to position portfolios ahead of upward moves in the precious metal.
"We see current prices as a good entry point to re-establish fresh longs," Goldman analysts Damien Courvalin and Alec Phillips wrote in a Jan. 18 report.
The bank reaffirmed its three-month price target for gold of $1,825 an ounce. (Gold was trading at $1,695.20 in New York Tuesday.)
"The uncertainty associated with these (debt-ceiling) issues, combined with our economists' forecast for weak U.S. GDP growth in the first half of 2013 following the negative impact of higher taxes, will push gold" to the three-month target, the report stated.
The Goldman strategists pointed out six instances between 1996 and 2007 when the country hit the debt ceiling and the Treasury responded by using its muscle to execute "extraordinary measures" to keep the country afloat and running.
Gold prices rallied some 10% in half of these instances in the month prior to the debt-limit increase.
Gold Prices: Don’t Let Faber Scare You
- By Deborah Baratz, Contributing Writer, Money Morning - January 11, 2013
After hitting its 12th straight year of new highs, gold prices got off to a bumpy start in 2013.
"Dr. Doom" Marc Faber even came out Tuesday with a reduced price prediction for gold.
In a CNBC "Squawk Box" interview, Faber said, "I don't think [gold] will go up right away, and we maybe have a correction of 10 percent or so on the downside."
Faber had also estimated a gold price range in his JanuaryMarket Commentary of "... perhaps down to between $1550 and $1600."
But any gold price correction would be a short-term move. Even Faber admitted central bank action is a reason to bet on higher gold prices for the long term.
That's why investors should look at any price correction in gold as an opportunity to stock up.
By Thursday, the yellow metal jumped 1% after the European Central Bank left interest rates the same and the euro rose against the dollar. The February gold contract jumped $20.90 (1.3%) to $1,676.40 per troy ounce.
Seven Ways to Tell if Your Gold Is Counterfeit
- By Peter Krauth, Resource Specialist, Money Morning - January 2, 2013
It was chained to a display table and kept safe by an armed guard. At the time, in 2005, the bar was worth $220,000.
Today, the same bar is worth $549,200. In just eight years, gold prices have jumped by 150% -- and that's even with a 27% drop from the peak of $1,900 in 2011.
But it's not the eternal fascination with gold that has boosted the price. With growing levels of worldwide uncertainties, mounting inflation risks, and government distrust, people are clamoring for gold primarily as insurance.
According to the World Gold Council, 2011 saw gold bars and coins reach nearly $77 billion in sales, versus 2002's $3.5 billion. And in November alone, the U.S. Mint's sales of the popular American Eagle coins jumped 131% in the wake of the election.
Editor's Note: Right now, four separate indicators are saying gold is set to surge. Any one of them is bullish on its own. But when all four signals flash at once...
With the market for gold growing at a feverish pace, it's now more important than ever to know that your gold is the real deal - especially now that gold has begun to show signs of a strong rebound.
Gold counterfeiting is nothing new. In fact, just recently there were reports of fake gold bars from China turning up in New York. Instead of gold, their centers were stuffed with tungsten.
But rest assured there are a number of methods you can use to mitigate the risks of ending up with counterfeit gold. Some are simple, quick, and inexpensive. Others are more elaborate, detailed, and not so readily accessible.
Here are seven ways to find out if the gold you own is real:
To continue reading, please click here...
Your 2013 Guide to Investing in Gold
- By William Patalon III, Executive Editor, Money Morning - December 27, 2012
I put that question to Real Asset Returns Editor Peter Krauth last week.
You see, there's a lot of interest in investing in gold right now. Or perhaps I should say that there's a lot of interest in what gold might do.
And you can certainly understand why.
From its November 2008 market lows, the SPDR Gold Trust (NYSE: GLD) - the No. 1 proxy for the "yellow metal" - rose as much as 158%, reaching its peak in September 2011. But it's down about 13% since that time (though it's up 5% year to date), and a lot of folks are wondering what gold is worth, and how they should play it.
Wall Street has grown more tepid on gold, with many of the investment banks ratcheting back just a bit on their target prices. But most also see prices heading up to and beyond the $2,000 level in 2013, meaning they see a potential gain of 22% or better.
Peter's target price is a bit more aggressive: He sees gold trading as high as $2,200 an ounce - 34% above current prices in the $1,640 range.
I've worked with Peter for several years now, and admire the way he works.
He based himself in resource-rich Canada in order to be closer to the many companies that he covers. And he's made a number of truly superb market calls: In September 2010, for instance, when silver was trading at $19 an ounce, Peter told investors the metal was a "Buy" - and we then watched it soar to a high of $48 (a 153% windfall).
So when I decided to bring you the latest insights on gold - and some recommendations, as well - I went to Peter.
To continue reading, please click here...
Why Are Gold Prices Down?
- By Diane Alter, Contributing Writer, Money Morning - December 20, 2012
After the surprising strong report, February gold tumbled $14.50 an ounce to $1,653.50 and spot gold sank $22.80 to $1,643.10.
Silver prices fell as well, losing $1.13 to $29.95 shortly before noon. Prior to the report, the yellow and white metals were little changed.
The fresh report revealed GDP in the third quarter expanded at an annual rate of 3.1%, the fastest growth since late 2011. That was up from the 2.7% pace logged last month, and better than economists' expected 2.8% rate.
Phil Streible, a senior commodity broker at R.J. O'Brien & Associates in Chicago told Bloomberg News, "The GDP number was better than forecast, so the thinking is that improving conditions in the economy might mean a light at the end of the tunnel on when the Fed will end QE3."
Gold and silver have been big beneficiaries of the FOMC's generous QE3 programs.
But there's more than the end of QE measures as to why gold prices are down.
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