price of gold

How Shorts on Gold ETFs are Nearing a Big Squeeze

By Guest Editorial, Money Morning - June 19, 2012

There has been an increasing number of investors taking short positions on gold exchange-traded funds (ETFs) - but they better watch out for what's ahead this summer.

In fact, each day that passes brings us closer to what could be the day of reckoning for those holding massive short positions on the ETFs for gold, silver, copper and related investments.

You see, the Federal Reserve Bank of Kansas City in late August will host an economic policy symposium in Jackson Hole, WY. Speaking at the conference, as he did in August of 2010 when he introduced the second round of quantitative easing, will be Federal Reserve Chairman Ben Bernanke.

There is much to believe that QE3 - if not declared sooner - could be announced at Jackson Hole. Should this happen, the prices of gold, silver and copper will likely soar like back in 2010.

That means anyone holding shorts on gold ETFs or similar investments could find themselves scrambling to cover their positions.

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Gold News: Why the Yellow Metal is Glistening

By Diane Alter, Contributing Writer, Money Morning - June 1, 2012

Comex gold futures surged Friday and soared to a bright three-week high following a very dismal U.S. jobs report.

The rally in gold came after the Labor Department reported employers added just 69,000 jobs in May, well below the anticipated 150,000. The data also pushed the unemployment level up a tick to 8.2% from 8.1%, stoking worries that the U.S. economy is still ailing and a recovery is far from certain.

The lackluster jobs report ignited hopes that a fresh round of quantitative easing may be in the near future. Gold prices climbed on the prospect.

Market participants returned to gold pushing the front month contract up some $59, nearly 3%, in early afternoon trading to $1,619.10 a troy ounce.

Silver rose in concert, gaining 96 cents to $28.67.

Trading was heavy and volatile in precious metals Friday, as traders moved quickly to cover short positions.

To date in 2012, gold has been experiencing its worst showing since the 2008 financial crisis. But the catalysts may be aligning to turn the trend upward.

"It's very likely that the economic data today and what's come out of Europe has convinced the market that there will be further government monetary stimulus," Robert Lutts, chief investment officer of Cabot Money Management, told Reuters. "Larger institutions will commit money to gold in ways they never had before."

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Here’s the Deal with Gold Prices

By Guest Admin, Money Morning - May 31, 2012

Gold prices have slipped, and investors keep wondering how low they’ll go. Money Morning Chief Investment Strategist Keith Fitz-Gerald joined Fox Business’ “Varney & Co.” to discuss the factors keeping gold down. Fitz-Gerald said these two reasons are the main drivers behind lower gold prices. In this video he explains if those factors are long-term or not. He also discusses with host Stuart Varney how Europe may handle its debt crisis, how the strategies will further affect gold – and how the current market and economic statistics could influence election 2012.

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Europe Drives Gold Prices This Week, But Don't Lose Sight of Long-Term

By Diane Alter, Contributing Writer, Money Morning - May 25, 2012

Gold prices managed to eke out a slight gain Friday to move back above the $1,560 a troy ounce mark - but the precious metal has had a less-than-stellar run this week, on track for a 1.9% loss.

In London trading Friday, the spot gold price was up 0.4% at $1,563.71, bouncing from as low as $1,533.41 earlier this week.

The upward move in gold came as the euro rebounded some from two-year lows against the dollar. The euro inched up from early lows against the dollar Friday, although sentiment around the troubled currency remains guarded.

Gold's rise Friday also was attributed to bargain hunting, calmer markets and short covering ahead of the three-day holiday weekend.

This week continues gold's eleven-week downward trend as the state of Greece and the entire Eurozone region has kept world markets on edge and investors jittery.

Worries over Greece exiting the Eurozone prompted heavy selling in the currency this week as the ailing Mediterranean country, operating without a government, faces imminent default.

"Gold's direction seems to be driven more by the level of market risk aversion and the euro currently," BNP Paribas analyst Anne-Laure Tremblay told Reuters. "Market sentiment on gold is fragile at the moment. There have been tentative rebounds, but so far bullish momentum has yet to materialize."

As always, however, there's another side to this story.

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Good News for Gold Prices: Commodities are Wounded, But Far From Dead

By Peter Krauth, Resource Specialist, Money Morning - May 24, 2012

Greece is frozen in a political stalemate. Youth unemployment is running at over 50%. And there has been a $1 billion run on Greek banks.

From near and afar, there appears to be no easy way out, especially now that the Eurozone is heading back into a recession.

It's times like these when investors pour into the U.S. dollar for its "perceived safety."

With commodities priced in U.S. dollars, this spike in the greenback has sent commodities-including gold prices-into a tailspin since early March.

That has many doubters asking: "Has the commodities super-cycle ended?"

It's a reasonable question considering the Continuous Commodity Index (CCI) is back down to levels it last saw in September 2010.

What's more, gold prices have backed off to near $1,500/oz., and oil prices have fallen from $110 to $90/barrel.

But as you'll see, the commodities coin does have another side.

The Other Side of the Commodities Story

In fact, a recent article by Frank Holmes, CEO and chief investment officer at U.S. Global Investors, pointed out how China and other emerging nations are in better fiscal shape than much of the West.

Even if China is slowing somewhat, it is still growing at an enviable 8% per year, with only 42% debt to GDP ratio. So rather than go for more outright stimulus, it's expected that China will target new loan growth and its M2-money supply growth to around 14%.

Meanwhile, India and Australia have just lowered interest rates while other central banks are basically refusing to raise rates.

It means the world will keep turning, people will keep consuming and annual demand of raw materials is likely to remain elevated.

As for gold prices, let's cut right to the chase.

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Gold Prices and the "Grexit" Effect

By Guest Editorial, Money Morning - May 23, 2012

Lately gold prices have been affected by a strengthening dollar resulting from troubles overseas.

On Tuesday, Greek Prime Minister Lucas Papademos told Dow Jones Newswires that considerations were being made for a potential exit by Greece from the euro. He also warned that such an exit would be "catastrophic" for the country and that fallout across the entire Eurozone would be severe.

Concerns over what will happen to Greece and the Eurozone if Greece leaves have caused the euro to drop to $1.255, its lowest level against the dollar since July 2010.

These issues have led to a rising dollar as investors continue to move out of gold and into the dollar.

"Not surprisingly, Greece is the biggest single factor behind the move [out of gold and into dollars]," said Money Morning Chief Investment Strategist Keith Fitz-Gerald on May 11. "Traders are concerned that the nation will summarily go its own way, shatter the EU's bailout and potentially sink the euro itself."

Constant worries loom of a "Grexit" as European leaders met in an informal summit in Brussels today (Wednesday) to talk about the debt crisis and how best to spur growth in the struggling Eurozone.

The meeting comes a day after the Organization for Economic Cooperation and Development (OECD) issued a warning that the 17 countries that use the euro risk falling into a "severe recession."

"The crisis in the Eurozone remains the single biggest downside risk facing the global outlook," said Pier Carlo Padoan, chief economist for the OECD.

So just how low can gold prices go?

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Everything You Need to Know About Gold Prices

By Keith Fitz-Gerald, Chief Investment Strategist, Money Map Report • @kfgtotalwealth - May 11, 2012

Gold's hot. Then it's not. Now what?

Where did the love for the shiny metal go?

Now the gold bugs are crying, and the "I told you so crowd" is warming up in the wings.

After a stunning rally to $1,895/oz., gold prices are down hard, falling below $1,600/oz. That's a 16.11% drop that has the gold bears drooling for more-but probably not for long.

Let's start with gold prices themselves. Right now they're down three months in a row and many gold investors fear there's no bottom in sight.

What they don't realize is that the fall in gold prices is as rare as proverbial hen's teeth. This is the first time we've seen gold prices tumble three months in a row since March of 2001.

In fact, since 1957 we've only seen gold prices fall three months in a row 65 times out of a total of 661 three-month periods, according to data compiled by Bloomberg and Standard and Poor's.

But here's the thing about gold prices...

Gold could fall all the way through May, turning what it already a rare occurrence into an ultra-rare occurrence.

Would that be a bad thing? In the bigger scheme of things, not really.

People forget that gold prices fell by more than half from 1975 to 1976, and were down 17 out of 24 months. At the same time, gold prices also recorded 10 three-month declines during the period.

That was, incidentally, right before gold rose 721.25% to $850.00/oz.-- a peak gold hit on January 21, 1980.

The point is, bear tracks always precede bull market runs. So I am not especially concerned by this pullback in gold.

In fact, as you can see from an earlier forecast, we're right on target with my expectations for gold this year.

Take a look at what I shared with my readers on January 2, 2012:

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Gold Prices to Break $2,000: Here's How You Can Profit

By Guest Editorial, Money Morning - May 11, 2012

Gold prices are still far from last year's record $1,920.30 an ounce.

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. Instead, it's a chance to stock up before gold prices head to $2,000 an ounce. (Want to know the best way to profit from soaring gold prices this year? Take a look at our latest special report today. It shows you how to get daily market information and specific recommendations in gold... silver... penny stocks... Asia... and biotech, to name just a few. Find the report right here.)

The Fed, India, and Gold Prices

For the next three months, the U.S. Federal Reserve is focused on a stabilizing U.S. economy and low inflation. In fact, the Fed's most recent forecast cooled talk of more monetary stimulus (or "quantitative easing").

The Fed expects U.S. economic growth to progress at a steady pace throughout the quarter. With moderate expansion rather than rapid growth or deflation, there's no need to curb borrowing, and Federal Reserve Chairman Ben Bernanke plans to keep interest rates near zero.

This bodes well for the U.S. dollar, and what's good for the dollar is often bad for gold prices.

It's no secret that a weakened dollar sends investors running to the real value of hard commodities. A stronger dollar does the inverse: It causes the big investors to be less cautious with regard to investments in liquid capital, creating a dip in gold prices.

Lagging Indian imports have also contributed to lower gold prices at the beginning of this quarter...

The Bernanke Effect on Gold Prices, Silver Prices Means Time to Buy Metals

By Kerri Shannon, Associate Editor, Money Morning - March 15, 2012

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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John Paulson Says Now's the Time to Buy Gold

By Kerri Shannon, Associate Editor, Money Morning - February 17, 2012

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.

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