Gold

The Ultimate Gift for Your Gold Lover and 5 Other Amazing Consumer Trends

Package gift small Last weekend marked the official start of the holiday shopping season in the U.S., so for the next month, consumers will be enticed with daily deals on the latest fads, such as one-cup coffee makers, tablets, flat screens and cashmere sweaters.

According to the latest survey from the Consumer Electronic Association, about 60 percent of adults plan to shop in stores or online during the holiday weekend, with the average person indicating they'll fork over $218 for gifts and merchandise from Thanksgiving through Cyber Monday.

This is a sharp increase from 2011, where shoppers said they'd spend $159.



For the ultimate gold lover on your shopping list, one amazing purchase you can nab is a Christmas tree complete with Disney characters and gold leaf ribbons made of 88 pounds of pure gold from a jewelry store in Tokyo, according to Reuters.

The ornamental tree will set you back $4.2 million, but there's also a smaller version available for $243,000.

But that's not the only thing that has grabbed my attention this holiday season. Here are 5 other amazing consumer trends that are happening around the world.

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Billionaires Buying Gold Bullish for the Yellow Metal

When billionaire investors are buying gold, it probably means prices for the yellow metal are headed higher.

Three well-known billionaire investors - George Soros, John Paulsen and Julian Robertson - have been adding heavily to their gold holdings this year.

Gold buying by some of the world's most successful investors is a strong argument that gold prices, despite their impressive rise over the past several years, still have a long way to go.

The precious metal is expected to enjoy its 12th straight year of increases in 2013. So far this year, gold prices are up about 10%.

Forecasters see gold rising each quarter in 2013, ending at $1,925 an ounce in the last quarter, or 11% higher than current prices, according to Bloomberg.

While gold prices haven't moved much lately, investors need to stay focused on the long term.

On Tuesday, December gold futures on the Comex fell $8.50 (0.5%) to $1,725.9 an ounce. This came after remarks by Fed Chairman Ben Bernanke that the looming fiscal cliff could threaten the U.S. economy.

Of course, such minor bumps haven't kept the smart money - billionaire investors -- from buying gold.

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Why China's Buying Gold

With gold prices on track to log a 12th consecutive annual gain, China is beginning to take a fresh shine to the yellow metal.

Now China's buying gold in an attempt to play catch up with the United States and other influential nations, the London Bullion Market Association reports.

At a recent conference in Hong Kong, Chairman David Gornall told the association's conference, "When comparing China to the U.S., it would seem that in China, gold asset allocation can only go in one direction. The country has only 2% of its reserves in the form of gold compared with the U.S. at 75%."

Other developed countries, including Germany, Italy and France, maintain a gold reserve in excess of 70%. Meanwhile, China's share lags, data from the World Gold Council reveals, trailing at a paltry 2%.

Since 2009, The People's Bank of China has not disclosed any changes to its gold holdings. At that time, the bank noted its stash had risen by 76% to some 1,054 tons. Its cache is set to swell again as the country, facing an economic slowdown from a plethora of lethargic international markets, gets defensive.

The spike in gold imports to China, via Hong Kong, reveals new significant accumulations of the commodity. Chinese imports of the precious metal totaled 69.7 metric tons in September, a striking 22% increase from a year ago.

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Why Obama's Victory Means Higher Gold Prices

Our recent story on the secret return to the gold standard drew an interesting response from Money Morning reader John B., which I've paraphrased below.

In response to the article, John wrote:

"All this talk about buying gold. Where is the gold going to come from? No one seems to be selling. And what about all the scamming that's going on in the gold market these days?"

Here's the thing: John essentially agrees with the case we made for gold - he just doesn't realize it.

And with President Barack Obama's successful re-election, the case for higher gold prices got even stronger - overnight.

Let me give you seven reasons that gold prices are destined to head much higher in the next several years. Let's call it the Obama "baker's half-dozen" case for gold:

  1. The Central Banker Effect: Official statistics, which some observers dispute (I'll get to that in a minute), say that the world's central banks have become net buyers of gold for the first time in nearly a quarter century. If that's the case, that's clearly bullish for gold. At the very least, we're not going to see any big selling.
  2. The Central Banker Effect (Part Deux): Although we referred to the "Secret Gold Standard" to underscore the point that central banks were returning to the gold market, we made clear this wasn't a literal return to a Bretton Woods-style "gold standard." There's not enough gold in the world to support such a move - which is why Capital Economics Chief Economist Julian Jessop recently estimated that a return to the gold standard would cause the price of the yellow metal to spike to $10,000 an ounce. There's an important lesson here: If central banks are hoarding gold, prices can't help but go higher - gold standard or not.

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By The 2016 Election Gold Could Be $3700 an Ounce

It's now two years and two billion dollars later...

And in many ways, we're right back where we started with the same President, and a house divided.

For investors, all the uncertainty this situation brings to the fiscal cliff and its impending tax increases and spending cuts are likely to fuel plenty of volatility for the next several months.

Yesterday's almost 300 point drop on the Dow and a 7% pop in the VIX are good examples of this.

We can also expect Ben Bernanke to be in place until at least early 2014. The only change I expect from the Fed now is more frequent and still larger easing campaigns, as well as potentially extending low rates, again, beyond mid-2015. Even if Bernanke is replaced, I expect only more of the same seriously misguided policies.

In fact, just yesterday San Francisco Fed President John Williams hinted that the most recent QE3 bond buying program could well exceed $600 billion.

So what does all of this mean to investors in hard assets--particularly those with holdings in gold and silver?



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The Secret Return to the "Gold Standard"

Although it happened more than 40 years ago, many Americans still rue the day back in 1971 when U.S. President Richard M. Nixon effectively took this country off the so-called "gold standard."

Under a true gold standard, paper notes are "convertible" into pre-determined, fixed quantities of the "yellow metal."

What actually happened back in 1971 was that President Nixon - facing huge budget and trade deficits, and a plunging dollar - enacted a series of economic moves, including the unilateral cancellation of the direct convertibility of the U.S. dollar into gold.

By slamming the "gold window" shut, Nixon also brought down the curtain on the existing Bretton Woods system of global financial exchange.

The fallout was immediate, creating a situation that financial historians still refer to as the "Nixon Shock."

Proponents of the gold standard say the real damage is still being wrought: That decision four decades ago led directly to the uncertainty, volatility and irresponsibility that we see in the U.S. economy and global financial markets today.

Whether you agree or not is a topic for another time.

But what I'm here to tell you today is that the world's central banks have quietly - almost secretly - returned the world to a new version of the gold standard.

Back in 2010, the world's central banks became net buyers of gold for the first time since 1988. Buying ramped last year and net purchases exceeded 455 metric tons (tonnes). That was the largest net purchase since 1964.

But the world's central bankers will handily eclipse the 2011 totals here in 2012: They will purchase a projected 493 metric tons this year as they expand reserves to diversify away from the U.S. dollar and protect their countries' economies against inflation, Thomson Reuters GFMS said.

And GFMS said you can expect central banks "to remain a significant gold buyer for some time to come."

Real Asset Returns Editor Peter Krauth told me he completely agrees with that assessment.

As Peter explained: "You can see their thinking, Bill ... you can see them saying: "We have enough of all these fiat currencies in our bank reserves - now we want something that's going to counter those holdings, that's a valuable asset and that has all the right fundamentals in place.' And that asset is gold."

We're seeing the results of this "new gold standard" in the marketplace...



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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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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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Gold Bugs Love It, But a New Gold Standard is Just a Dream –For Now

Thanks largely to Ron Paul, the Republicans have suddenly become enamored of gold.

And why not?...It is real money.

These newly-born gold bugs have even gone so far as to include a call for a commission to examine a return to the gold standard in the party platform.

Needless to say, we've come a long way since President Richard Nixon "closed the gold window" in 1971. Forty-one years, and a few financial disasters later, the debate has begun anew.

But it begs the question: How would the gold standard work?

What's more, what would the economic implications be, and is it likely to happen or is it all just a gold bug's dream?

In ancient and medieval times the answers were quite a bit more simple. Since there was no real banking system, there was also no argument.

Kings coined money with gold, silver, or copper, and the people accepted the money at a price based on its metal content. The idea of taking paper instead would have been thought of as sheer madness.

Only in China, an isolated and stable society, was paper money used during the Song Dynasty of the 10th through 13th centuries, but even there the Mongol invasion and fall of the Song regime caused the paper money system to collapse.

Paper money backed by gold only became possible once modern banking got going in Europe in the 16th and 17th centuries.

In fact, the British Gold Standard was devised in 1717 by no less than Isaac Newton, then Master of the Mint. Other countries soon joined Britain in linking their currencies to gold, including the United States from 1878 until its abandonment in 1933.

Of course, countries claimed to be on a gold standard under the Bretton Woods Agreement from 1944-71, but gold was only exchangeable between governments. Indeed, holding gold was prohibited in the U.S. for private individuals.

But inevitably, the Bretton Woods monetary system itself became manipulated and collapsed in inflation.

That brings us to today....



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Gold Prices Rise as All Signs Point to More Stimulus

Gold prices were on the rise again today (Wednesday) as the market digests the recent spate of global economic data that could warrant more stimulus measures - and send metals prices soaring.

China reported last Friday that its July consumer price index (CPI) rose to 1.8% from the previous year, representing its lowest jump since January 2010. Industrial production declined to 9.2% from June's 9.5% thanks to slowing growth in heavy industrial production. Retail sales fell to 13.1% from June's 13.7%.

There's more: July exports increased 1% from the previous year, while imports rose 4.7%, exemplifying a weak external demand, but also a slowdown in Chinese investment.

As if this wasn't enough news to fuel a little action in the gold markets, Japan continued the trend on Monday with news that its economic growth in the second quarter had slowed down more than anticipated.

Also triggering stimulus speculation was news out of Europe that the Eurozone's economies contracted in the second quarter. The European Union's statistics office said yesterday (Tuesday) that six countries were in recessions.

"It looks like the gold market will continue to be held up by the sentiment of expected central-bank stimulation," Marex Spectron Group said in a report Tuesday. "The downside risk is limited."



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What the Last Roman Emperor Would Tell President Obama Today

Over the course of 700 years, the ancient Roman Empire grew from a small republic to one that stretched from London to Baghdad at its peak.

As one of the world's first true superpowers, the Empire's achievements included the world's first standing professional army, economic prowess, intellectual growth and governance principles that are commonly regarded as the basis for modern society.

But it is also remembered for its spectacular collapse in less than a century under the weight of bad debt, an overextension of the Empire, a collapse of morals that led to a deluded and self-absorbed political elite and reckless public spending that far outweighed collections.

Given the parallels to our situation, I can only imagine what Romulus Augustus, widely considered to be the last of the Roman Emperors, would tell President Barack Obama today about how to prevent the wholesale destruction of our own "Empire."

But it would probably go like this...

Cara praeses Obama, (Dear President Obama)

Like mine, your world is changing fast. No doubt it's very different from the one you thought you'd inherited. Your success will depend on new thinking and an eye to the future taken from lessons of the past.

I wouldn't be offended if you have never heard of me.

I oversaw the dying days of what you know as the Classic Western Roman Empire. My fall in September 476 marked the end of centuries of greatness and the fall of ancient Rome.

Some historians consider my departure as the beginning of the Middle Ages. I understand the nature of collapse: how it begins, how it progresses, and where it all ends.

As a historical footnote to a once great empire, here's my advice to you, Mr. President.



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Keep a Close Eye on Gold Prices Next Week

The U.S. Federal Reserve is about to give a huge boost to gold prices, and the first push could come as soon as next week.

The parade of dismal economic reports both here and abroad has stoked hopes that more stimulus, in the form of a third round of quantitative easing, is imminent. A clear signal of when we can expect QE3 could come at next week's two-day Federal Open Market Committee (FOMC) meeting that starts July 31.

An increasing number of Federal Reserve officials are convinced the central bank must expand its stimulus operation immediately amid the recent spate of glum data signaling economic growth has hit a roadblock. Several members will push for urgent action, although some may move to delay a decision until September.

Fed Chairman Ben Bernanke told Congress last week that a fresh round of quantitative easing is an option the FOMC is mulling to try and lower the elevated unemployment level.

"We are committed to ensuring, or at least doing all we can to ensure, that we continue to make progress on unemployment," Bernanke said just last week.

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