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When and How Gold Will Begin its Bubble
The bull market in Gold is in its 12th year (globally it began in 1999) but has yet to exhibit any “bubble-like” conditions. In fact, we still see many people referring to this bull market as “the Gold trade,” as if its an aberration that needs to be reversed or corrected. That aside, we know that Gold is under-owned as an asset class. The very well respected BCA Research estimates that globally only 1% is allocated to Gold and that fits with some of the charts that I’ve shown in the past.
Institutional accumulation began in 2009 (e.g. Paulson, Einhorn) and we know that phase lasts at least a few years before a bull market gives birth to a bubble.
Part of the problem for Gold has been the solid performance of other asset classes through most of the Gold bull market. Stocks performed very well from 2003 to 2007 and from 2009-2010. Commodities performed well from 2001-2002 and in the first half of 2008. If stocks are doing well or if commodities such as oil and agriculture are performing well, it detracts from Gold. Gold performs its absolute best when the other asset classes underperform or don’t perform too well.
Let me explain the conditions and setup that will facilitate the birth of a bubble and Gold going mainstream. Read more…
Gold: Major Buy Signals!
Gold and Precious Metals
UUP (US Dollar Proxy) Chart.
US Dollar Analysis:
- The Dollar decline on soft volume over the past few days has given me a buy signal. I use our US dollar signals to play the dollar, and to coordinate your Gold and Gold Stock purchases.
- Let me be clear; the move up here in the dollar is nothing more than a dead cat bounce, so don’t play it too big. When looking at the decline in the dollar from July through November, the dollar dropped nearly 15%. The most troubling sign I see for the USD over the longer term is the distribution in the ensuing rally in the Nov- Dec time frame. The dollar is in a major bear market, and rallies in bear markets tend to be sharp, and can end long before they are “supposed to”.
- The performance of the US Dollar over the last ten years is pathetic. The dollar has lost massive purchasing power against almost every single other asset. Consider: Crude Oil is up over 250%, and the Commodity Agricultural Raw Materials Index is up 57%. Many other commodities are up over 200% against the dollar, in the same timeframe. Why has this happened?
- The answer is: Debt Accumulation. Debt is growing, so the fundamental causes of the dollar bear market are also growing. The financial crisis is not ending. It is getting worse. Read more…
China buys gold and the world follows
“We are entering a period of strong seasonal growth in gold demand and Chinese New Year is a big part of that,” said Brien Lundin, editor of Gold Newsletter. “Physical demand has been supporting the gold prices on the downside even during the typical slack periods, and I expect that upcoming increase in demand will also support the price, but at higher levels.”
The Chinese New Year, also known as Lunar New Year, begins on Feb. 3 this year and ends with the Lantern Festival 15 days later.
“Chinese gold and silver demand has been phenomenal ahead of the New Year holiday,” said Adrian Ash, head of research at BullionVault.com, a leading online service for gold bullion trading and ownership, citing comments from dealers among others.
Shipments have been “heavy” and they began very early, in mid-December, he said. Read more…
Gold May Gain as Europe Debt Concern, Price Drop Spur Demand
Sungwoo Park
Jan. 18 (Bloomberg) — Gold may gain as concerns that the European sovereign-debt crisis may linger boost demand for precious metals as a protector of wealth, and as a price drop in the past two weeks spurs physical buying. Platinum gained.
Bullion for immediate delivery was little changed at $1,364.18 an ounce at 1:33 p.m. in Seoul. The metal, which rose to a record $1,341.25 in December, dropped 4 percent this month, heading for the first monthly decline since July. The February- delivery contract rose 0.2 percent to $1,363.50 an ounce in New York.
“Around this level, we still see quite good physical demand,” Bruce Ikemizu, head of commodity trading at Standard Bank Plc in Tokyo, said today by phone. “I’m rather pessimistic. The problems won’t be resolved overnight. This European financial problem will be a long-term bullish factor for gold and precious metals.”
The euro was little changed against the dollar after yesterday falling 0.7 percent amid concern that an agreement among European finance ministers will fail to contain the region’s debt crisis. Euro-area finance ministers indicated after a meeting yesterday they aren’t facing immediate pressure to tame the crisis, while pledging to strengthen the safety net for debt-strapped countries.
Morgan Stanley raised its gold forecast through 2015, the bank said in a report today. It expects gold to average $1,400 an ounce this year, 6 percent more than a previous forecast.
Assets in 10 gold exchange-traded products dropped 6.54 metric tons to about 2,078 tons as of Jan. 14, the lowest since Sept. 15, according to data compiled by Bloomberg.
Platinum for immediate delivery gained 0.5 percent to $1,813.70 an ounce. Spot palladium declined for a fourth day, dropping 0.4 percent to $791.50 an ounce, while silver was little changed at $28.2975 an ounce.
Tunisia President’s Wife Left with 1.5 Tons of Gold
The French government suspects that former Tunisian president Zine al-Abidine Ben Ali and his family may have fled the country with 1.5 tons of gold, French daily Le Monde reported Monday.
According to the French secret service, Leila Trabelsi, the wife of the ex-president, went to the Central Bank of Tunisia to fetch the gold bars, the paper reported.
The governor of the bank is reported to have refused to give them to her, so Trabelsi rang her husband who first also refused to help, before giving in, according to Le Monde.
“It seems that the wife of Ben Ali left with some gold, 1.5 tons or 45 million euros worth (67 million dollars),” a French politician told the paper.
But a central bank official denied receiving verbal or written orders for gold withdrawals, adding that the country’s gold reserves “have not moved,” Le Monde said.
An official from the Elysée told Le Monde that “this information comes directly from Tunisia, in particular the Central Bank. It seems to be pretty much confirmed.”
Trabelsi took a flight to Dubai, before heading to Jeddah. It is still unclear how Ben Ali left Tunisia.
According to Italian sources, reports suggest the former president’s airplane was in Maltese airspace without the authority to land.
There is also speculation that Ben Ali may have left Tunisia by helicopter to Malta and then taken his plane from there.
The French government believes the Libyan secret service may have helped Ben Ali flee in order to avoid violence, Le Monde reported.
Dubbed ‘the Imelda Marcos of the Arab world’ because of her lavish lifestyle and love of designer clothes, Leila Trabelsi is said to have demanded the gold last week as President Zine Al Abidine Ben Ali’s regime collapsed.
The chief of Tunisia’s central bank initially refused but Ben Ali, 74, personally intervened, and she flew out with the bullion as she joined him in exile in Saudi Arabia.
The source of the claim, leading Tunisian economist Moncef Cheikhrouhou, said militia men had tried to take more gold. The clan of the former first lady is widely despised as the ultimate symbol of corruption and excess.
A former hairdresser, Mrs Ben Ali, 53, is known for her love of fast cars – the family had more than 50 – luxury homes and frequent shopping trips to Dubai, during which she is said to have spent hundreds of thousands of pounds.
While many Tunisians faced unemployment, poor living conditions and oppression from Ben Ali’s brutal regime, his family – known as ‘The Mafia’ in the North African country’s capital Tunis – is said to have amassed a £3.5billion fortune. Much of it is kept in France, where some members of the family were still holed up last night.
Gold Could Have Seen Its 2011 Low
Gold could have already seen it’s low for the year when it dipped to $1,353/oz Friday, before rebounding after the weaker-than-expected U.S. non-farm payrolls data. “With the U.S. economy recovering slower than expected, and worries over (sovereign debt problems in) the euro-zone back on the front line, it seems that we have seen the year low,” says MKS Finance. Spot gold is at $1,371.20/oz, up $1.40 since Friday’s New York close.
Gold Reserves of the World
Bullion analyst Mark Robinson says this is the biggest and most ambitious task that China has ever announced.
“If China wants to take its gold reserves to 10,000 tonnes in 10 years, the country needs to buy or acquire the yellow metal to the quantity of nearly 1000 tonnes per year.”
Which countries own the largest quantity of gold reserves right now?
- World leader the United States has 8133 tonnes of gold reserves, accounting for 76.5% of its foreign exchange reserves;
- Germany has the second highest gold reserves at 3412.6 tonnes;
- France has 2508 tonnes of gold constituting 58.7% of its forex assets;
- Italy has 2451.8 tonnes of gold constituting 61.9% of forex reserves;
- China became the fifth biggest holder of gold reserves this April with 1054 tonnes;
- Switzerland has 1040 tonnes of gold reserves constituting 23.8% of total forex reserves;
- India which recently bought 200 tonnes of gold from IMF has 557 tonnes of gold reserves representing 3% of total forex reserves.
- The IMF, which currently holds 3,217 tonnes of gold, is the third-largest official holder of the precious metal, but is not technically a sovereign central bank. The IMF has made gold sales a key element of its new income model aimed at lowering its dependence on lending revenue to cover expenses.
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