Thursday, October 31, 2013

Gold's fundamentals "uniquely positive," says billionaire Paul Singer's hedge fund - Wealth Managers


Elliott Management sees potential inflation -- or worse -- ahead from Fed QE

Despite all the negative press from the mainstream financial media, gold still has some high-powered fans in the professional investing world.

Billionaire 
John Paulson is sticking to his golden guns as the largest stakeholder in the biggest gold ETF, telling theDelivering Alpha conference in mid-July: "If you're looking for a hedge against potential inflation in the future and have a longer-term view, I continue to believe that it's an important part of anyone's portfolio."

And earlier this month, 
Frank Giustra -- billionaire mining mogul, Lion's Gate Entertainment founder, and BFF of ex-President Bill Clinton -- also came out swinging for gold at the 2013 Canaccord Genuity Global Resources conference in Miami: "All the reasons gold went from $250 to $1,900 are still. In fact, they've been amplified tenfold," he said. Washington faces a choice, he added. "They can either default, or print money. ... And they'll never default."

And now billionaire 
Paul Singer's firm, Elliott Management, is staking out a gold claim to offset potential inflation. "TheFederal Reserve's easy-money policies have distorted the economy and created big risks for markets and investors alike, prompting the hedge fund firm to add to long gold options to protect against inflation," Reuters reported, citing an Oct. 28 letter to investors. "Elliott is adding to its bullish gold option holdings that aim for limited downside risk with a large upside potential, saying it still feels that fundamentals are 'uniquely positive for gold.'"

Singer made some rather dark pronouncements in the letter, as 
reported by Zero Hedge.
On QE: "The recent trading environment has felt something like walking into a place and having a sense that something is wrong and dangerous but not knowing exactly what will happen or when. 'QE Infinity' has so distorted the prices of stocks and bonds that nobody can possibly determine what the investing landscape would look like, or what the condition of the economy and financial system would be, in the absence of Fed bond-buying."
On bonds and interest rates"$3.8 trillion of bond-buying since 2008 by the Fed has had only a temporary effect on medium- and long-term interest rates. It is impossible to predict the prices of bonds in the event the Fed stops buying, or actually starts to sell off its massive portfolio, although it is a decent bet that prices would be much lower than current levels."
 
On stocks"It is also not clear whether stock prices, which are still on a tear and at all-time nominal highs, are at these levels because of optimistic economic prospects, QE, or the beginnings of a loss of confidence in paper money causing a shifting of capital out of fixed income and into purportedly 'real' assets. However, the fragility of capital markets, so reliant on zero percent interest rates (ZIRP) and QE Infinity for their equilibrium, is clearer. The markets' ability to withstand any adversity is highly questionable, and it appears to us that the Fed is basically paralyzed." 
On federal debt and fiscal irresponsibility"We are talking about the underlying structural issues of the federal budget deficit, economic growth, the deeply contentious Affordable Care Act, and the long-term insolvency of the country due to the government having made (and continuing to make) massively unpayable promises for the future. As we have pointed out, the current annual federal deficit, so ballyhooed to be 'coming down nicely,' is actually catastrophically out of control. It is not a trillion dollars. The true figure is more like $7 trillion (and growing!) after accounting for unfunded liabilities, which are mounting at a fantastic pace. It is not an exaggeration to say that America is deeply insolvent, and for that matter, so are most of continental Europe, the U.K. and Japan. No combination of achievable growth rates and taxes can pay for the promises that have been made. The numbers are clear and inexorable. ... What has been happening with the U.S. federal government in its recent highly-theatrical phase, as contentious and difficult as it has been, is merely a precursor to much bigger events."
 

On tapering"If QE loses effectiveness now and the plug is pulled, the economic consequences could be disastrous, because the Fed didn't force the President and Congress to adopt progrowth policies when it had the chance. At the same time, if the current course is maintained, the ultimate results are likely to be much worse."
No wonder Singer and his firm are seeking shelter in gold!

More information can be found online at http://www.goldbullionadvisors.com

Gold Bullion headed to record highs by next decade, CPM Group forecasts - Wealth Managers


"Prices to have limited downside from the lows reached in June 2013"

The CPM Group is out with its Gold Long-Term Outlookreport for 2013, and it's predicting record prices over a 10-year period.

However, it does see near-term price weakness. If that pans out, investors with a long-term horizon can reap the rewards if they're patient.

"Investors are still interested in owning 
gold for many of the same reasons they were buying it for since 2002," it said in announcing the new report. "The main difference now is they are in less of a rush to hoard up on the metal. They have grown increasingly price sensitive, which results in them holding off on making fresh purchases when prices rise. This is unlike the period between 2009 and 2011, when investors were buying large volumes of gold even as prices were rising. ...

"Investors' present price sensitivity is expected to weigh on gold prices for the next few years. At the same time, since they remain interested in owning gold, they are likely to continue buying whenever prices decline. CPM Group expects gold prices to have limited downside from the lows reached in June 2013 as a result. ...

"The sharp decline in gold prices in 2013 and the inability of gold to make a strong comeback has resulted in many market participants moving to the sidelines and waiting to see how low gold prices will fall before they resume buying. Once they are convinced that the bottom in the market is reached, there should be stronger buying interest, which should help push gold prices higher."


More information can be found online at http://www.goldbullionadvisors.com

Wednesday, October 30, 2013

Turkey, Kazakhstan lead central banks in raising gold reserves - Wealth Managers


Russia's reserves fall by less than half-ton for first time in a year

In another supportive sign for the gold market, central banks for the most part continue buy bullion to expand their reserves and diversify away from the dollar and other fiat currencies.

Data from the 
International Monetary Fund show that Turkey and Kazakhstan both bought gold in September. Turkey's holding rose 2.9 tons to 490.3 tons, increasing for a third month, while Kazakhstan's holdings expanded for the 12th straight month, by 2.52 tons to 137.04 tons, the data showed.

Azerbaijan's hoard expanded for a ninth month, while Belarus, Kuwait, the Kyrgyz Republic, Serbia, and Ukraine also added to reserves.

Notably, though, Russia reduced its gold reserves for the first time in a year. It sold a relatively miniscule amount of gold, about 0.37 of a metric ton.
WSJ distorts the big picture
While central-bank purchases this year likely will fall short of the record 534.6 tons added last year, the most since 1964, the total is on target to hit 350 tons in 2013, the 
World Gold Council predicts.

Still, that didn't stop 
The Wall Street Journal from publishing an irresponsible hit piece ("Gold fades from investment picture") on gold, centered around Russia's small sale. Never mind that Russia raised its gold reserves about 57.4 tons this year, and that Russian economic official Alexei Ulyukayevsaid in January that its central bank will continue buying bullion, though at a variable pace. 
The more gold, the more sovereignty
Dave Kranzler
 of The Golden Truth blog completely dismantles the WSJ's article: "Since 2007 Russia has nearly tripled its gold reserves and has been steadily accumulating nearly every month since then. ... There were two other months, both in 2012, when Russia sold a small amount of gold. To make the assertion that a relatively small gold sale by the Russian central bank indicates that Russia's appetite for gold is waning is outright incompetent reporting. It's a borderline fraudulent statement. In fact, one Russian government official recently had this to say: 'The more gold a country has, the more sovereignty it will have if there's a cataclysm with the dollar, the euro, the pound or any other reserve currency.'" 

Meanwhile, China remains a total enigma. We simply don't know how much gold its central bank is accumulating because it doesn't regularly release those figures. We do know that, as Kranzler notes, that "China alone is on track to import close to entire annual amount of gold that will produced in 2013 by all gold mines." Gold expert 
Jim Rickards expects China to make the bombshell announcement next year that it has amassed more than 5,000 tons of bullion.

Kranzler is right in dismissing the WSJ for its hysterical article based on Russia selling a drop in the bucket of its growing gold reserves.
Gold is "a reserve of safety"
As 
European Central Bank chief Mario Draghi said of gold earlier this year, drawing on his experience as former head of the Bank of Italy: "I never thought it wise to sell it, because for central banks this is a reserve of safety. ... In the case of nondollar countries, it gives you a fairly good protection against the fluctuations of the dollar, so there are several reasons, risk diversification and so on. So that's why central banks -- which had started a program for selling gold a few years ago -- substantially, I think, stopped. By and large they are not selling it any longer."

And The Wall Street Journal did 
correctly point out that "at a gold industry event in September, central-bank officials from France, Germany and Argentina said that gold's volatility hadn't prompted any of their banks to plan to sell the metal." The even was the London Bullion Market Association's annual conference, and also included a vociferous defense of gold by a Bank of Italy official.

Despite the WSJ's misleading headline, central-bank support for gold remains robust and long-term.


More information can be found online at http://www.goldbullionadvisors.com

Tuesday, October 29, 2013

Gold Bullion eases ahead of widely expected no-taper Fed announcement - Wealth Managers


Slew of economic data suggests economy spinning wheels at stall speed

Gold settled lower Tuesday as investors took profits ahead of the conclusion of the Federal Reserve's policy meeting Wednesday, trading roughly between $1,340 and $1,355.

The gold market reached a "pretty important technical crossroads with gold in the $1,350s," 
said Gene Arensberg of the Got Gold Report. "Between $1,350 and $1,375 is (an unknown but almost certain) point of transition where the 'maybe new bull-market leg' becomes a 'confirmed new bull-market leg', which would invite participation by momentum traders in larger numbers.

"On the other hand, below about $1,325 (if sustained) would signal that this current, surprisingly firm bullish impulse has failed, at least for the short term," he said. "The [Fed] meeting this week is a distraction with the gold market pricing in something longer term now."

The statement due Wednesday "might act as a trigger of sorts," he said. It may be "a starting gun for whichever side, bull or bear," actually has the bigger pull on the market.
Except for stocks, economy going nowhere fast
"While the U.S. economy is not currently in danger of slipping back into recession, neither is it accelerating. The government shutdown and budget battles certainly did not help matters," said 
Russ Koesterich, global chief investment strategist atBlackRock. "The drama undermined business confidence, which in turn dampens hiring."

U.S. stocks rose, with the 
S&P 500 Index extending a record, as new economic data raised the odds of a dovish Fed statement Wednesday.

"It still seems that the Fed has created this good news is bad news, bad news is good news scenario," noted 
Randy Bateman of Huntington Asset Advisors. "The anticipation is that the Fed will retain its purchasing of $85 billion in monthly Treasury and mortgage securities, which is going to continue to help the housing market. That will be taken fairly well by the market."
Key numbers falling flat -- or worse
Data showed retail sales dropped 0.1% last month, restrained by the biggest decrease at auto dealers since October 2012. Wholesale prices unexpectedly fell in September as food costs retreated. Inflation has been running below the Fed's 2% target in the near-term, giving its policymakers room to maintain monetary stimulus.

A separate report showed 
confidence among U.S. consumersdeclined in October by the most since August 2011 as the budget impasse and debt-ceiling negotiations in Washington took a toll on outlooks.

And 
on Monday, U.S. manufacturing output barely rose in September, and contracts to buy previously owned homesrecorded their largest drop in nearly 3-1/2 years.

The reports showed economic activity was on weak footing even before a 16-day partial shutdown of the U.S. federal government early in October that is expected to weigh on fourth quarter growth.
"Economy seems to be losing steam"
"The economy seems to be losing steam as higher mortgage rates have hit the housing market and destructive government policy will likely bash the rest of the economy," said 
Joel Naroff, chief economist at Naroff Economic Advisers.

As 
MarketWatch observed, "U.S. growth was sputtering before the government shutdown in early October, and judging by the latest look under the hood, it could take a while before the economy generates enough power to get over the latest speed humps."

Given this anemic data, don't expect the Fed to be taking away its stimulative punchbowl anytime soon as it struggles to wring the deflationary forces out of the U.S. economy. And that unprecedented effort carries with it the risk of eventual wealth-destroying inflation, not to mention an unsustainable stock bubble. Stay prepared with gold.


More information can be found online at http://www.goldbullionadvisors.com

Friday, October 25, 2013

Gold heading to $1,500: Do the math, says Santiago Capital - Wealth Managers


"There's a very high correlation between the monetary base, the national debt, and gold"

Santiago Capital CEO Brent Johnson told CNBC in an Oct. 24 appearance on "Futures Now" that gold could hit $1,500 again by the end of the year:

"I don't know that gold is necessarily going to outperform stocks in the short term. I think QE is here to stay, and I think as long as they keep pumping that much money into the market, equities can go up. But I do think that gold is towards the very end of its correction this year. I expect gold to go much higher, even before the end of the year and on into next year. I don't necessarily think equities are coming down anytime soon, but I do think the correction in gold is largely over. ...

"My kind of unofficial tagline is: 
You either believe in math, or you believe in magic. I happen to believe in math. And the projection that our U.S. debt level is on is starting to go exponential -- and the way the system is designed, it's designed to increase even more. ...

"There's a very high correlation between the monetary base, the national debt, and gold. For the long-term picture, that's the main driver. There's a lot of other key drivers as well, but that's the big picture for me. ...

"It wouldn't surprise me to see us back at $1,500 or $1,550 by the end of the year. ...

"A number of different firms around the world are saying 'Sell gold,' that it's a 'slam dunk sell,' so there's still a lot of negative sentiment out there. And there are a lot of shorts out there. ...

"You can get a bit of a pop, and all of the sudden those shorts start to cover, people start to realize that QE is here to stay and not going anywhere, and things can change very quickly. I mean, gold can go up just as quick as it came down."

When does tapering start? "Never. The only way they can taper is if they come up with some other system to continue increasing the monetary base. Now, they can call it what they want, but they cannot stop the easing."


More information can be found online at http://www.goldbullionadvisors.com

Wednesday, October 23, 2013

Debt-ceiling deal gives feds a blank check until February - Wealth Managers


Even more ominously, "the president now has the ability to unilaterally get rid of the debt-ceiling limit"

Shortly after Congress approved a deal to reopen the government into January 2014 and extend the debt ceiling until February, the national debt blasted through $17 trillion.
According to The Economic Collapse blog, the U.S. racked up $1 trillion in debt in the past 12 months: "On Sept. 30, 2012, the U.S. national debt was sitting at $16,066,241,407,385.89. Today, it is up to $17,075,590,107,963.57. ... For a long time the national debt was stuck at just less than $16.7 trillion because of the debt ceiling fight, but now that the debt ceiling crisis has been delayed for a few months the national debt is soaring once again. In fact, just one day after the deal in Congress was reached, the U.S. national debt rose by an astounding $328 billion. In the blink of an eye we shattered the $17 trillion mark with no end in sight. We are stealing about $100,000,000 from our children and our grandchildren every single hour of every single day. This goes on 24 hours a day, month after month, year after year without any interruption."

Frighteningly, the deal set no dollar cap on the debt ceiling -- just a temporal date. Now the federal government has no limit on its spending though February. Be very afraid.

As 
The Washington Times reported Oct. 18: "Usually Congress sets a borrowing limit, or debt ceiling, that caps the total amount the government can be in the red. But under the terms of this week's deal, Congress set a deadline instead of a dollar cap. That means debt can rise as much as Mr.Obama and Congress want it to, until the Feb. 7 deadline. Judging by the rate of increase over the past five months, that could end up meaning Congress just granted Mr. Obama a debt increase of $700 billion or more."

In addition to expanding the debt, the deal also apparently expands the executive branch's power over the debt ceiling by taking away Congress' checkmating ability.

Ex-Congressman 
Ron Paul, R-Texas, warned"Congress surrendered more power to the president in this bill. Instead of setting a new debt ceiling, it simply 'suspended' the debt ceiling until February. This gives the administration a blank check to run up as much debt as it pleases from now until Feb. 7. Congress can 'disapprove' the debt-ceiling suspension, but only if it passes a resolution of disapproval by a two-thirds majority. How long before Congress totally abdicates its constitutional authority over spending by allowing the Treasury permanent and unlimited authority to borrow money without seeking Congressional approval?" 

And 
Dave Kranzler of The Golden Truth blog confirmed in aSeeking Alpha article"In order for Congress to override the president's veto, 2/3's of both Houses of Congress would have to approve of the rejection of the president's veto. There's no way both the Senate and the House would be capable of doing this. In other words, the president now has the ability to unilaterally get rid of the debt-ceiling limit. QE to infinity.

"Everyone follow that? In effect, and for all practical intents and purposes, although in theory it's not entirely the case, the U.S. government no longer has a debt-ceiling limit. It was only a matter of time before everything came to this. And now it will require a lot more 
Federal Reserve money printing in order to fund the enormous issuance of Treasury debt that is coming our way. There's no way the Chinese and our other big foreign financiers will ever agree to invest money in the bonds of a country that has absolutely no constraints on debt issuance. This is why the U.S. dollar has been literally falling off of a cliff since early July." 


Now is the time to hedge against this exploding debt and the falling dollar with a diversified portfolio that includes inflation-hedging real assets like 
gold and silver bullion and rare coins

More information can be found online at http://www.goldbullionadvisors.com

Tuesday, October 22, 2013

Gold up, dollar down this week, CNBC polls predict - Wealth Managers


BofA Merrill Lynch, Morgan Stanley both see November rally in the making

With the gold price most often moving in the opposite direction of the U.S. dollar, two new CNBC polls suggest that this week might be a glittering one for the yellow metal.

Its 
poll of gold-market sentiment showed 52%(12 out of 23) respondents expect prices will rise this week, while 39% predict declines, and 9% are neutral. CNBC also cited IG Markets' latest positioning data, which show that of the more than 500 clients with open positions, 67% expect prices to rise, while the remaining 33% expect declines.

And according to CNBC's latest 
market survey of currency experts, damage from the U.S. government shutdown will keep the dollar under pressure this week, as well as force theFederal Reserve to delay the withdrawal of stimulus until next year. Nearly 89% (24 out of 27) of respondents believe the dollar will slide this week, while just 7% (2 out of 27) say the dollar will gain. "The bullish dollar story has been shunted into 2014," said Simon Grose-Hodge, head of investment advisory at LGT Bank in Singapore. "The dollar certainly looks vulnerable on the Fed outlook."
India's festival season usually drives gold
India's festival season is another big reason to be bullish on gold, 
say analysts at BofA Merrill Lynch and Morgan Stanley, saying the metal is poised for a November rally. In a note to clients today, BAML analysts led by Michael Jalonenwrote:
"Looking ahead, history would indicate that November is usually a strong month (with an average monthly gain of 3.8% in November) for gold prices thanks to the wedding and festival season in India. Thus we believe that bullion could mount a modest rally to the $1,350-$1,400/oz range over the next month or so."

Morgan Stanley analyst 
Paretosh Misra agreed:
"Indian festival season could provide a lift to gold. Traditionally, the Diwali festival (specifically, Dhanteras, the two days before Diwali) is the biggest gold buying period of the year in India. In the last 10 years, gold has risen an average 2.5% in the one month around Diwali. While government's new import restrictions and [rupee] depreciation could adversely affect gold imports, buying should be supported by ~20% YoY decline in gold in rupee terms." 

"Dismal sentiment" always a good sign

A couple of other analysts also recently weighed in. 
Pater Tenebrarum of Acting Man blog finds that overwhelming negative sentiment among the general public is always a good sign, from a contrarian standpoint:
"Considering how absolutely dismal sentiment on gold is, considering the many similarities to the 2008 'retest' that could be observed recently (back then, gold was also declared 'dead' by the mainstream) and given the fact that for a change, the gold market has not acted in the way that was widely expected, it continues to make sense to look for more signs of a trend change to emerge. Ideally declines should continue to be kept in check by support at $1,275, while any rally that manages to exceed the $1,350 level on a closing basis and confirmed by the gold stock indexes can probably be interpreted as a sign that the short to medium term trend has finally reversed for good."
Gold "horribly mispriced"
And in an interview with 
Chris Martenson's Peak Prosperity, gold expert Alistair Macleod finds the metal extremely undervalued, especially when comparing prices with the pre-Lehman Bros. collapse period:
"If I adjust the price of gold from just before Lehman Bros. went under, I think I'm right in saying that in July 2008, the price of gold at the close of that month was $918/ounce.

"Now, if you adjust that price by the extra fiat money quantity that is now in circulation, gold has actually gone down, in real terms if you like, by about 30%. Put another way, if the price of gold was to match in real terms that $918 level, it would today be about $1,860. So we have this extraordinary thing where gold, for whatever reason, has become extremely undervalued compared to where it was before Lehman Bros. went under. Now this is important, because before Lehman Bros. went under, not many people actually understood systemic risk. So the price of gold did not really include the weighting for systemic risk. ...

"There is a substantial hyperinflation risk that is going to affect prices somewhere down the line. And yet, gold is trading at a discount of 30% to where it was before all of this happened, so it is horribly mispriced."


More information can be found online at http://www.goldbullionadvisors.com

Thursday, October 17, 2013

Gold Bullion rips through $1,320 - Wealth Managers


Fed tapering once again on the back burner because of shutdown's economic damage

Gold blitzed back through the $1,300 level and then some in overnight trading Thursday, topping $1,320 in a 3% surge after Congress ended the government shutdown and approved a temporary solution to the debt-ceiling impasse.Silver also followed suit, breaking the $22 level to hit $22.19 at its peak and notching a 3% gain as well.

The deal, which reopens the government through most of January and raises the debt ceiling into February, ultimately is a can-kicking exercise that enables the federal government's big-spending ways to continue until the face-off resumes in 2014.
"The situation is not sustainable"
"In a nutshell, we are back to business as normal where the U.S. government spends way too much money; which we have to borrow on the global market," 
Jeffrey Wright of H.C. Wainwright LLC told MarketWatch. "We have no realistic way to pay it back, and even with a 'shrinking' rate of deficits, the situation is not sustainable.

"Gold is the natural vehicle to counterbalance this behavior and is going higher once again," he said.
AvaTrade analyst Naeem Aslan added: "Given that we only have a temporary fix for the economy and the underlying issues are still not addressed, we are far away from being out of the woods. As the shutdown has cost nearly $24 billion for the economy, the challenges which [Federal Reserve] will face will not only be limited to the unemployment rate, repairing the reputation, but also perhaps preparing to accommodate for the debt-ceiling circus which will return in February," he said.
Top Chinese agency downgrades U.S.
China isn't buying Congress' temporary resolution either -- its top rating agency 
downgraded the U.S. credit grade. "The deal means only an escape from a debt default for the time being," said Dagong, "but hasn't changed the fact that the growth of government borrowing has largely outpaced overall economic growth and fiscal revenues."

Gold also gained on growing realization that the Fed likely won't be tapering at its meeting next week -- and perhaps not even until 2014, when 
Janet Yellen will have succeeded Ben Bernanke as central-bank chair.
Shutdown inflicts hit to GDP
"The U.S. debt deal is seen (as) positive for gold by market participants, for good reason, since the whole mess is just being postponed by 3-4 months, which makes a reduction of Fed asset purchases rather unlikely for the time being,"
Commerzbank analyst Carsten Fritsch said.

"What we've done is some serious damage to fourth-quarter growth," 
said Bart Melek, senior commodity strategist at TD Securities. With as many as 800,000 people foregoing a paycheck throughout the shutdown, which likely limited spending, the U.S. economic expansion in the fourth quarter is likely to be 0.4% and 0.6% lower. "If the Fed didn't feel comfortable tightening policy or removing accommodation in September, it's even more likely to be reluctant to do so now," he said. 
"This is just too tender a moment"

Two Fed officials -- a hawk and a dove -- were making the rounds Thursday underscoring that no-taper notion.

"Reckless" U.S. fiscal policy will likely force the Fed to stand pat on monetary policy this month, said Dallas Fed chief
Richard Fisher, one of the Fed's biggest critics of the bond-buying stimulus program known as quantitative easing (QE). "My personal opinion is that (tapering's) not in play," he saidTuesday. "This is just too tender a moment. ... I personally would have a hard time arguing for us to dial it back" this month, he said.

And Chicago Fed dove 
Charles Evans echoed that message. "The data are still not definitive enough to say that now is time to adjust the QE3 flow purchase rate," Evans said. He would personally like to see "more steady, solid growth" in GDP data to be confident in the enduring strength of the labor market. 

More information can be found online at http://www.goldbullionadvisors.com