This Month in Gold – November 2011

POSTED ON November 30, 2011 - POSTED IN Key Gold Headlines

Criminal Charges Leveled Against Goldline Execs
ABC News – The Santa Monica City Attorney’s office has leveled fraud and theft charges against executives at Goldline, the prominent California gold dealer, in a 19-count criminal complaint. At its core, the complaint argues Goldline persuaded customers interested in buying gold bullion to instead buy numismatic coins worth significantly less than the advertised face value. In certain cases, the complaint alleges Goldline sold coins at double their market value. Santa Monica officials launched the investigation into Goldline over a year ago. Goldline has risen to prominence thanks to the endorsements of leading conservative radio and TV personalities including Glenn Beck, Fred Thompson and Mike Huckabee.
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Qatari Wealth Fund to Invest $10bn in Gold Sector
The Telegraph – The Qatari royal family this month confirmed that it plans to invest up to $10 billion in the gold sector via its sovereign wealth fund, Qatar Holdings. The first investment tranche of $1 billion is to be made in, of all places, Greece. Qatar Holdings will invest in Goldfields, a miner listed on the London Stock Exchange that is presently developing the largest gold-mining project in the Hellenic Republic. Greek authorities anticipate the cash infusion will create 1,500 sorely-needed jobs.
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Tenant Pays The Donald in Gold
FOX Business – If you live in a Trump property, you can now pay your rent in gold. Trump has, for the first time, accepted approximately $200,000 worth of bullion from a tenant to cover the rent for the 50th floor of 40 Wall Street. An outspoken critic of the Fed’s money printing, Trump stated: “It’s a sad day when a large property owner starts accepting gold instead of the dollar. The economy is bad, and Obama’s not protecting the dollar at all… If I do this, other people are going to start doing it, and maybe we’ll see some changes.”
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Miner Gets Physical with Dividend Payout
Wall Street Journal – Gold Resource Corp., a Colorado Springs, Colorado company with operations in southern Mexico, has come up a novel way to distinguish itself. The company announced this month that it will soon start making dividend payments on its stock in bullion rather than US dollars. Jason Reid, president of Gold Resource Corp., argues that many investors (one assumes especially those buying gold mining stocks) would rather hold physical gold or silver than fiat currencies that governments will continue to debase.
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This Month in Gold – October 2011

POSTED ON October 31, 2011 - POSTED IN Key Gold Headlines

China Buys Gold to Challenge US Dollar
Al Jazeera – America’s diplomats know the world will one day pull the plug on the US dollar’s life support system. A recently published, unredacted Wikileaks cable from the US Embassy in Beijing shows that the concern has, in fact, been at the front of their minds. The cable quotes an editorial in a Chinese government-sponsored newspaper claiming Beijing is increasingly buying gold to encourage the rise of monetary alternatives; in effect, as the cable quips, to “kill two birds with one stone” by simultaneously undermining the US dollar’s and euro’s status as reserve currencies.
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Hedge Fund Heavyweight Sees Gold at $2,200
Bloomberg – Tony Hall, the moonlight boxer and hedge-fund heavyweight who returned a whopping 33 percent for his clients last year, prefers to fight from the gold corner. Golden-glove Hall believes that the yellow metal could work its way up to $2,200 an ounce by the end of 2011. Hall notes that in today’s turbulent economic environment, gold is attractive due both to its safe-haven and inflation-hedge qualities. For Hall, the latest correction in gold to the $1,700 level is a good opportunity to jump back into the ring.
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Gold-Backed Dollar Puts ‘Fair Value’ at $10,000 an Ounce
Bloomberg – If every US dollar in circulation were actually backed by the full faith and credit of incorruptible gold and not by politicians’ hollow promises, you would need approximately 10,000 greenbacks to buy one ounce of the yellow metal, a recent report maintains. Dylan Grice, a London-based global strategist at French bank SociÃ©tÃ© GÃ©nÃ©rale, crunched the numbers and says that the $10,000 figure is the actual “fair value” of gold. Significantly, the calculation suggests that in playing catch-up, gold has the potential to quintuple its current spot price.
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Industry Eyes Gold at $2,000+
The Globe and Mail – According to the average prediction of participants at the London Bullion Market Association’s conference, the gold industry’s biggest annual gathering, gold is primed to crack the $2,000 an ounce threshold over the coming year. Participants expressed Ã¼ber-bullish sentiments based on their direct experience with buyers and sellers. For instance, Steven Nathan, marketing director at the Rand Refinery in South Africa, had this to say about the popular Krugerrand coin: “Demand is insatiable. It’s the strongest period ever right now.” Incidentally, in years past, the conferences’ average predictions have often turned out to be excessively cautious.
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This Month in Gold – August 2011

POSTED ON August 3, 2011 - POSTED IN Key Gold Headlines

Gold Mining Commanding a Premium
Financial Post – Gold, like oil, is getting harder and harder to find. That is the conclusion of a recent report by Clarus Securities. Employing data from the Society of Economic Geologists, analyst Laurie Curtis finds that deposits yielding high quantities of gold per ton of ore extracted peaked in the 1980s. The cost of discovery, in particular, has nearly quintupled to $47 an ounce in 2009, up from $10 an ounce during the 1980s. Higher capital expenditure and a steadily increasing gold price will be the only way for supply to keep up with today’s surging demand. Read Full Article>>

Gold Standard Emerging as World Order Unravels
The Telegraph – Ambrose Evans-Pritchard, international business editor of The Daily Telegraph, writes that with Japan and the West likely at debt saturation, gold is making a comeback to its historical role as an anchor of stability in a sea of liquidity. Squabbling politicians in Washington and Brussels make for good theater, but generate little confidence in the eyes of investors as regards the medium- to long-term resilience of the purchasing power of their respective fiat currencies. No alternative asset class exists that is capable of absorbing the impending wave of wealth on the lookout for safekeeping. With the post-Bretton Woods global monetary order growing increasingly threadbare by the day, a new gold standard is just over the horizon, forecasts Mr. Evans-Pritchard.
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Swiss Mull Re-Linking Franc to Gold
MarketWatch (WSJ) – The Swissie has performed admirably over the course of past three years as the flight to quality has taken center stage. But for the right-wing Swiss People’s Party (SVP), a strong, resilient Franc is not enough, and certainly does not equate with a bulletproof Franc backed by solid gold. Later this year, the Swiss Parliament, which decoupled the Franc from gold as recently as the year 2000, is expected to debate the introduction of a parallel Gold Franc. The little Alpine nation still holds almost as much bullion as gargantuan China. Per capita, it is #1, with $6K in gold per person – six times the amount per person held by the US.
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This Month in Gold – July 2011

POSTED ON July 3, 2011 - POSTED IN Key Gold Headlines

Crisis of Confidence in US Dollar Possible: UN
Financial Post – Ban Ki-Moon has just won a second term as UN Secretary-General. Kudos. The eroding value of his tax-exempt salary denominated in US dollars, however, is less cause for celebration. A mid-year review of the world economy by the UN’s economic division points out that a continued decline in the value of the US dollar vis-Ã -vis a basket of other major currencies could precipitate a crisis of confidence, and possibly a collapse. Such an eventuality would with certainty imperil the global financial system. Rob Vos, a senior economist who contributed to the review, explained to Reuters that the brain trust isn’t arguing that a collapse will happen tomorrow, but that the headwinds are fast compounding, and a point of no return could come sooner rather than later.
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EU Facilitates Use of Gold as Collateral
The Australian – The European Parliament’s Committee on Economic and Monetary Affairs resolved unanimously in late May to permit clearing houses to accept gold as collateral. The decision must still pass muster at the European Parliament and the Council of the EU in July. Nevertheless, the Committee’s harmony of opinion represents a significant shift in political sentiment regarding the utility of gold as a store of value. Since the 2008 financial crisis, investors and financial institutions have clamored for alternative sources of collateral. Traditional collateral assets, such as European government bonds, have seen their credit quality erode.
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Mining Chief Sees $2,000 Gold
The Australian– Richard O’Brien, Chief Executive of the world’s largest gold producer, Newmont Mining, commented on the sidelines of the World Economic Forum on East Asia that the price of gold would likely reach $2,000 within five years. Mr. O’Brien said the newfound wealth generated by China’s growing middle class and a devaluing US dollar would underpin the rise. For 2011, however, he forecast the price would likely remain in the $1,500 to $1,600 bracket. At the very least, the mining chief believes gold will remain above $1,000 an ounce for ‘the foreseeable future,’ no matter the state of global markets.
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Utah Legalizes Gold, Silver Coins as Currency
Denver Post – Utah, the rugged “Beehive State,” became the first US jurisdiction to authorize the use of gold and silver coins as currency in late May. The move exempts the sale of precious metal coins from state capital gains taxes. State lawmakers passed the bill to protest Federal Reserve monetary policy, noting that citizens are losing faith in the dollar and deserve alternatives. A groundswell of gold- and silver-backed depository accounts that offer debit-like cards that consumers can use to make purchases is expected. Minnesota, North Carolina, Idaho, and almost a dozen other states are considering similar measures.
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This Month in Gold – June 2011

POSTED ON June 3, 2011 - POSTED IN Key Gold Headlines

Factbox: Gold Milestones on the Way to the Summit
Reuters – On Monday, May 2nd, gold attained an all-time record high of $1,575.79/oz. In commemoration of this historic milestone, a Reuters Factbox captures some important dates in gold’s trading history since the early 1970s: August 1971, Nixon takes dollar off gold standard; January 1980, gold peaks at record $850/oz on inflation concerns; August 1999, gold bottoms at $251.70/oz as central banks dump holdings; November 2005, gold cracks $500/oz, highest level since December 1980; March 2008, gold breaks through $1,000/oz barrier only months before Lehman bankruptcy. It has been a sprint to $1,500 an ounce and beyond ever since.
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Mexican Central Bank Quietly Buys Almost 100 Tons of Gold
MarketWatch – Discreetly, Mexico’s central bank added a whopping 93.3 tons of gold bullion to its reserve holdings in February and March. The move, reported by IMF statistics, is in tune with recent net central bank buying of gold following two decades of sales, according to the World Gold Council. The majority of the Bank of Mexico’s reserves are in US dollar-denominated assets – from which it is ostensibly seeking to diversify. Russia likewise expanded its gold holdings by 18.8 tons and Thailand by 9.3 tons over the same timeframe.
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Forbes Predicts US Gold Standard Within 5 Years
Human Events – In an exclusive interview with Human Events, celebrity businessman and owner of the Forbes media group Steve Forbes predicts the US will return to a gold standard within the next five years. “What seems astonishing today could become conventional wisdom in a short period of time,” Forbes said. Forbes believes a gold standard would help America resolve a host of economic, fiscal, and monetary problems. Mandating a commodity backing could help stabilize the value of the US dollar, restore global investors’ confidence in US debt, and reign in reckless federal spending. Forbes underscores that politicians need to “get over” the conviction that the Fed can single-handedly manage the economy via monetary policy. And, he warned, “you cannot trash your money without repercussions.”
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Demand for Gold Coins Suggests Bull Market Still Charging
Financial Post– Demand for gold coins remains muscular despite a transient pullback in commodities over the past month. This month, sales of American Eagle gold coins by the US Mint are on track to set a new decade high. The first week of May sales totaled 57 percent of April sales. Since high levels of coin sales have in the past augured well for the future price of gold, this groundswell in the secondary market suggests the gold rally still has a ways to go Analysts reckon fears over sovereign debt loads and inflation continue to fuel demand for secure physical holdings, while the American Eagle coin maintains its stellar reputation worldwide.
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For Paulson, Gold Still Glitters
DealBook (NYT) – Hedge fund magnate John Paulson – who rose to wealth and fame betting against the US subprime mortgage market – continues to be faithful to gold, which netted him $5 billion in personal gains in 2010. His loyalty endures even as prices dipped over the past month and other marquee players, such as George Soros, curbed their positions in the precious metal. At a recent conference, Paulson counseled that volatility was for the meantime inevitable and should not discourage taking a stake. Paulson believes the US dollar stands to lose even more value in the coming years, and as such, gold is not in a bubble but will instead protect against inflation and appreciate.
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This Month in Gold – May 2011

POSTED ON May 3, 2011 - POSTED IN Key Gold Headlines

Gold Breaks $1,500 An Ounce
New York Times – The price of gold broke through the psychologically significant $1,500 an ounce barrier on Wednesday, April 20th for the first time. Global inflation and sovereign debt concerns, geopolitical unrest in the Middle East, and mounting Asian demand combined to drive the precious metal to a new high. Although a record figure in nominal terms, when adjusted for inflation, the price of gold remains below the January 1980 peak of $2,435. The adjusted figure suggests plenty of room for continued appreciation. Not to be left behind, mutual funds are increasingly growing their gold holdings. And the burgeoning popularity of gold-based exchange-traded funds (ETFs), accessible to all manner of amateur and professional investors, is likewise aiding the ascent.
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Silver, Platinum Continue to Outshine Gold
The Toronto Sun – The price of gold has climbed consistently over the past decade. But silver, displaying markedly greater volatility, has gone parabolic. Silver doubled in price over the past year, and the bull run continued in April. The historic silver-to-gold ratio of 16:1 – a calculus based on the two metals’ approximate proportion in the ground – suggests it should be twice the price that it is today. In addition to being viewed as an effective inflation hedge, silver enjoys myriad industrial applications that undergird demand as the global economic recovery gains steam. Platinum, with a similar mix of safe haven & industrial exposure, but a much higher cost-per-weight, appears to be along for the ride.
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World Governments Fleeing the Dollar Flood
Wall Street Journal – “It’s our currency, but your problem,” said President Nixon’s Treasury Secretary John Connally in 1971. Apparently, not much has changed in the past 40 years. In its efforts to keep the US economy afloat as Congress dawdles on the deficit, the Federal Reserve is pumping dollars into the global financial system at a record clip. The Fed’s cheap credit is forcing investors to plunge their newfound monopoly money into emerging markets in search of higher returns and sustainable growth, resulting in rampant inflation overseas that foreign governments fear will stoke asset bubbles. The developing world is responding with capital controls, and, in a first since the 1994 Mexico peso crisis, these measures have received the tepid endorsement of the International Monetary Fund. The world is balking at Washington’s economic stewardship, looking to end its dollar addiction, and searching for viable alternatives. Will our currency finally become our problem?
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Report: Gold to Crack $2,000/oz Barrier Within 3 Years
The Telegraph – Analysts at Standard Chartered in London, the emerging markets-centric bank, have predicted that the price of gold will surpass $2,100 an ounce within three years and possibly $5,000 by decade’s end. Their latest report points to surging demand for bullion, linked to rising living standards in China and India, and a supply lag among gold miners as the primary drivers of the protracted bull run. To this, the analysts add that rock-bottom interest rates in the US over the short-to-medium run, a condition that will likely send the Dollar Index to new lows, should further buoy the yellow metal. Standard Chartered expects a peak in demand between 2014 and 2020.
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This Month in Gold – April 2011

POSTED ON April 3, 2011 - POSTED IN Key Gold Headlines

Gold Heads for Longest Run of Quarterly Gains in 3 Decades
Bloomberg – This month, gold marked its tenth straight quarterly gain and silver its ninth – the longest rallies for both since 1975. Unrest in the Middle East has piled on to existing concerns about the stability of the dollar and the euro to drive the precious metals. An analyst from price-tracking site The Bullion Desk forecast that as long as unrest continued and a low interest-rate environment prevailed, the extended bull market should continue as well. Gold and silver’s gains may have even been restrained this quarter by renewed optimism of a US recovery. If the recovery doesn’t materialize, there may be another big move up.
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China’s New Gold Rush: Nervous Citizens Help Fuel Bullion Boom
The Australian – China’s insatiable demand is broadening from industrial commodities to precious metals. After decades of building up a massive pool of savings, China’s citizens and government are now worried about the effects of high inflation. This has caused the world’s largest producer of gold to become a net importer in 2010, driving prices higher on the global markets. Another story remarks on the growing potential for China’s demand to surpass that of India, the world’s top consumer of gold, if growth continues at current rates. While many analysts would be wary of a particular asset class that is at record highs, it is noted that gold and silver are still below their real-dollar highs and the demand from Asia only seems to be growing.
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Bill Gross Calls US Budget a “Greek Tragedy”
Fortune – After Buffett, PIMCO’s Bill Gross became the latest establishment investor to defect from Washington’s party line. Gross’s firm was among the largest holders of US Treasuries before he started quickly liquidating his positions toward the end of 2010. Now, he is predicting that the current fiscal direction will guarantee an “effective default” by the US government through excessive money-printing. By including unfunded liabilities, Gross estimates that federal debt is over 8X as high as the media reports. As such, he finds the US sovereign default risk on par with the EU’s least solvent member-state – Greece.
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Utah: Forget Dollars. How about Gold?
CNN Money – The gold standard may be making a comeback. In a potentially historic act, Utah’s governor signed into law this month a measure that treats gold and silver coins as money within state boundaries. Specifically, the act recognizes bullion coins issued by the US Mint as currency instead of simply an investment asset and therefore exempts them from capital gains and other state taxes. While the new law has a limited practical effect – most taxes are federal – it does send a strong message to the Fed that the people of Utah want a strong, reliable currency backed by gold and silver. Other states with similar measures being considered include Virginia, New Hampshire, Georgia, Delaware, Montana, South Carolina, et al.
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This Month in Gold – March 2011

POSTED ON March 3, 2011 - POSTED IN Key Gold Headlines

China Gold Demand Growing at “Explosive” Pace
Reuters – More detail is provided on the “explosive” growth of gold demand in China. Zhou Ming, deputy head of the precious metals division of Industrial and Commercial Bank of China, the world’s largest bank by market value, explains, “As [the] Chinese get wealthy, they [are] look[ing] to diversify their investments and gold stands out as a good hedge against inflation.” He also noted the “frantic” demand for non-physical gold investments. Any form of gold buying benefits the price of physical gold – but the Chinese, with a strengthening financial system, are not as concerned about counterparty risk as Americans. Overall, China became a major importer of gold in 2010, despite its still-massive mining output. This comes as the Chinese government tries to cool the property market and encourage more widespread precious metal ownership.
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Barrick CFO: Central Banks May Shift More Reserves Into Gold
Wall Street Journal – The CFO of the world’s largest gold mining firm, Barrick Gold Corp., has noticed a “sea change” in the behavior of central banks: they are liquidating their post-crash dollar stockpiles in favor of gold. He says the central banks are concerned about their vast dollar holdings, but don’t see any viable paper alternatives. Mining firms follow central bank policies closely to allow them to effectively hedge their mining operations. This development is welcome news to Barrick, though it is also concerned about the resulting strength in foreign currencies, such as the Australian Dollar and Chilean Peso, relative to the US Dollar.
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Investors’ $102B Precious Metals Wager Shows Bull Market Intact
Bloomberg – In early February, gold was still in its holiday doldrums, but certain signals were already pointing to the rally we’ve subsequently experienced. Bloomberg’s top 5 analysts by past accuracy released forecasts which, on median, see gold rising 20% this year, and silver 24%. They noted silver’s turn of fortune, from the dark days of the phase-out of photo paper to today’s high demand from the electronics industry. One analyst remarked, “I had to chuckle when I saw reports that it was over for gold.” Hedge funds still hold nearly three times as many ‘long’ or ‘bullish’ futures contracts on gold than the 20-year average. And famed shop Paulson & Co. is still the largest investor in GLD. It appears that in this last correction, the smart money wasn’t selling.
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This Month in Gold – February 2011

POSTED ON February 3, 2011 - POSTED IN Key Gold Headlines

Utah Could Use Gold, Silver Under Sound Money Act
New American – The Utah State Legislature is considering a bill that would require the state government to accept taxes and pay obligations in gold or silver upon demand. The “Sound Money Act” cites the US Constitution’s requirement that “no state shall make anything but gold and silver a tender in payment of debts.” That clause has never been repealed, though it was ignored by the courts as the US was gradually taken off the gold standard. This groundbreaking piece of legislation (and fantastic promotional video) could be the start of a movement among the states to return to Constitutional money. Among the coins Utah would accept are: American Gold Eagles, Australian Kangaroos, Canadian Maple Leafs, and South African Krugerrands.
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Emerging Markets Feeling the Heat of High Inflation Rates
Economic Times – Emerging markets are struggling under the burden of inflation ‘exported’ from the US. As the Fed prints hundreds of billions of new dollars, export-based economies feel pressured to print an equivalent amount of their local currency to keep their manufacturers from being choked off from the developed markets. The BRIC bloc (Brazil, Russia, India, and China) are all hiking interest rates to try to contain the flood of dollars pouring in, but the Fed’s inflation is too much, too fast. As a result of strengthening currencies abroad, the Economic Times expects rising prices in “commodities such as gold, silver, crude oil, and various other metals.”
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Are Investors Becoming Too Bearish on Gold?
Minyanville – January saw investors selling gold bullion and mining shares, but the metal is starting to look oversold. Much of the correction is due to recent rate hikes in emerging markets, leading some to believe the threat of inflation is waning. However, Euro Pacific Precious Metals’ own Chief Economist Michael Pento notes that real interest rates are set to be negative for some time, which historically drives the gold price up. It is noted that since so many gold market timers are quick to sell on even potentially bearish news, the gold market is probably far from the euphoria which characterizes a bubble. Also noted is how many traders are shorting gold, which “makes it a virtual certainty that at whatever price point a reversal eventually occurs, it will be a violent one.” That means a fast leap upward may be due in February. Mr. Pento maintains a price target of $1,600/oz by the end of 2011.
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Gold Standard Fully Supported By… Alan Greenspan!?
Zero Hedge – Joining a chorus that now includes the President of the World Bank and the President of the Kansas City Fed, former Fed Chairman Alan Greenspan has publicly voiced his support for a return to the gold standard. Mr. Greenspan, credited by many with planting the seeds for the current dollar crisis, conceded on Fox Business Network that “some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or a currency board, because unless you do that, all of history suggests that inflation will take hold.” The re-indexing required to create a new gold standard from the remaining US stockpile would yield a gold price of $6,300/oz.
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This Month in Gold – January 2011

POSTED ON January 3, 2011 - POSTED IN Key Gold Headlines

Gold Imports by China Soar Almost Fivefold
Bloomberg – The Shanghai Gold Exchange reported that gold bullion imports into China have jumped five-fold since 2009. This reflects strong demand for gold investment among the Chinese, whose local currency, the yuan, is being rapidly devalued to maintain its exchange rate with the US dollar. While prices at the grocery store are rising 5-6% a year in yuan terms, they are falling in terms of gold as the Chinese standard of living rises. The sheer numbers quoted in the report indicate that the Chinese government may have lifted all of its restrictions on gold imports. Still, the result is surprising given China’s status as the world’s largest producer of gold – proving that private demand is outstripping their immense supply. The World Gold Council expects Chinese demand to increase another 43% next year.
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Gold Jumps on China’s Fund Approval
The Australian – Gold saw a jump this month after the Chinese government approved the mainland’s first fund giving Chinese citizens access to foreign gold ETFs. Chinese citizens have not previously had access to gold through the stock exchange, as Americans do with ETFs like GLD and CEF. This new Chinese fund will purchase shares in Western ETFs, rather than purchasing and storing its own gold. Still, this is viewed as a major milestone in the entrance of the Chinese into the gold markets.
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Gold Becoming a Hedge Against “Monetary Uncertainty”
CNBC.com – Famed analyst Dennis Gartman explains that precious metals demand is no longer driven by simple inflation concerns, but rather widespread monetary uncertainty. The eurozone is in danger of breaking apart; Washington is working overtime to undermine the value of the US dollar; and, no other paper currency is prepared to fill the void created by the big two. In fact, most other candidates – such as emerging market currencies – are largely backed by dollars and euros. So, central banks are turning to the only viable alternatives: gold and silver.
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