CNBC – Buy Gold Now Before it Gets to $2,000: Newmont CEO

March 27, 2012

Richard O'Brien, Newmont Mining president & CEO.

The head of Newmont Mining told CNBC Monday he sees the price of goldrising to $2,000 an ounce and the time to buy it is now before inflation “comes roaring back.”

At a time when investors want to invest in gold exchange-traded funds rather than the gold miners that pull the metal from the ground, Newmont [NEM  52.62    -0.83 (-1.55%)   ] CEO Richard O’Brien said either option is an “opportunity to participate in a bull market.”

But investing in Newmont gets you a dividendpegged to the gold price, and if gold does hit $2,000, as O’Brien predicts, investors would be getting a boost. Last year, when O’Brien predicted gold at $1,750 an ounce in 2012, Newmont’s dividend rose in each quarter and was 35 cents a share in the fourth quarter.

Right now, the company pays a 2.3 percent dividend, he said, but “when we get to $1,700 gold, it will go up to 2.5 percent. When we get to $2,000, we’d be 3.5 percent to 4 percent higher.” He did not say when he expects gold to rise to $2,000 an ounce but did say the company sees flat production and escalating costs this year.

But taking a longer view, he said, “If you think about the next year, the next three years, the next five years we’re in an upwardly sloping gold price environment.”

O’Brien said Federal Reserve Chairman Ben Bernanke’scomments on the economy earlier Monday show currencies are “going to continue to be cheap, and when inflation comes, it’s going to come roaring back and gold will look like an asset class that people should own. Buying it now is the best time to buy it.”

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CNBC – Uptrend in Gold to Continue; Next Target $1,880: Charts

February 9, 2012
Published: Tuesday, 7 Feb 2012 | 6:15 PM ET
By: Daryl Guppy
CNBC Contributor

The gold price has been historically influenced by three main factors – currency hedging, jewelry demand and central bank activity. To these factors we add a fourth – the activity of Exchange Traded Commodity Funds.

The use of gold for currency hedging goes hand in glove with central bank buying activity. When fiat paper currencies are under threat then gold is the instinctive hedge. Investors worried about holding euros, and also worried about the weakness in the U.S. dollar start buying gold. The developing weakness in the euro, and the potential collapse or restructuring of the euro zone, is the main driver behind the current gold rally.

There has been an increase in demand for third party exposure to the market. This is provided by the Exchange Traded Commodity Funds. The Exchange Traded Funds now account for a significant proportion of gold trading activity and their investors are not motivated by the same concern as professional traders or gold industry participants.

Underpinning this investment behavior is the consistent buying by central banks as they seek to build reserves to protect their currency. In 2010 and 2011 central bank buying provided a firm foundation for the prolonged uptrend. There is no evidence to suggest that central banks will become sellers in the near term future so this up trend support remains in place. This combination of factors has created a strong and sustainable uptrend in gold.

The weekly COMEX  [GCCV1  1747.50    16.20  (+0.94%)   ]gold chart shows a strong trading channel. Starting in 2010 April the lower trend line defines the lower edge of the trading channel. The upper edge of the trading channel is confirmed in May 2010. The current rebound rally starting from near $1,570 uses the lower trend line as a rebound point.

Between May 2010 and July 2011 the gold price moved in a rally and retreat pattern inside the trading channel. The strong breakout above the upper edge of the trading channel developed in July 2011. After the peak near $1,924 in September 2011 the gold price developed a new downtrend. In October and November 2011 the upper edge of the trading channel acted as a support level. The rebound rally in October provided the anchor point for the new downtrend line.

The rebound rally that has developed from the December 2011 low near $1,560 has two important features.

The first feature is that the rally has moved above the upper edge of the trading channel near $1,720. The second feature is that the price has also moved above the value of the downtrend line, which also has a value near $1,720.

This breakout above two important resistance features is very bullish. The first upside target is near $1,800. This is the peak of the November 2011 rally and it is a weak resistance level.

The width of the trading channel is calculated and this value is projected upwards to provide the second breakout target. This is near $1,860 but there is a high probability the price will use the previous resistance level near $1,880 as a target level.

The long established pattern of trend development inside the trading channel suggests that any breakout towards $1,800 and $1,880 will have the characteristics of a rally rather than a sustainable trend. This provides short term trading opportunities. In the longer term the gold price may return to trading inside the trading channel.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders –www.guppytraders.com . He is a regular guest on CNBC’s Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.

If you would like Daryl to chart a specific stock, commodity or currency, please write to us at ChartingAsia@cnbc.com. We welcome all questions, comments and requests.

CNBC assumes no responsibility for any losses, damages or liability whatsoever suffered or incurred by any person, resulting from or attributable to the use of the information published on this site. User is using this information at his/her sole risk.

© 2011 CNBC, Inc. All Rights Reserved


Forbes: Why Gold Is The Only Real Asset

January 9, 2012
Intelligent Investing Ideas from Forbes Investor Team
Investing |1/06/2012 @ 9:02AM |3,292 views
Bert Dohmen, Contributor

The traditional, institutional analysts will say, “I don’t understand gold. Why would anyone buy gold?” You have to understand the motivation: an investment in gold is long term. It locks up the money. The commission or management fee is much better for stocks that are traded. Many analysts have an axe to grind.

Every correction in gold is usually pronounced as the start of the “big gold bear market.” We have disagreed with that for the past 10 years. In fact, the most recent correction even turned many of the bulls bearish, while our technical indicators gave positive buy signals.

If you are skeptical about the long-term bullish case for gold, please consider this: A study by Stephen Cecchetti and his team at the Bank for International Settlements (BIS), which is often called the “Central Bank for Central Bankers,” concluded:

“The debt problems facing advanced economies are even worse than we thought.

“The basic facts are that combined debt in the rich club has risen from 165pc of GDP thirty years ago to 310pc today, led by Japan at 456pc and Portugal at 363pc.

“Debt is rising to points that are above anything we have seen, except during major wars. Public debt ratios are currently on an explosive path in a number of countries. These countries will need to implement drastic policy changes. Stabilization might not be enough.”

In my opinion, the compounding interest on this debt is even more ominous than the actual level. There is no way that this debt will ever be reduced. Remember, much of this debt was accumulated during the boom years when tax receipts were very high. Now we will be in long period of stagnation or worse, possibly lasting 10-15 years or until the next big war. That means tax revenues will be on a long-term decline even as tax rates rise. The debt levels will grow exponentially.

Trillions of sovereign debt, private debt, and bank debt have to be refinanced. Where will that money come from? The printing press, or with today’s technology, “cyber-money.” There is no other way out. And that will make gold the only true money that will hold its value.

Sometime in the future, there could actually be a gold shortage. This is not unrealistic. All the major mining companies say that it is becoming very difficult to find new deposits. CNBC had a great report on the South African mines. They sent one of their top people, Bob Pisani, to do a report. He went 2 km down into a mine where the air-conditioned temperature is 100° F. Without air conditioning, it would be 130°. It was a fascinating report about the mining, refining, and then the ETFs.

Some of the South African mines are as deep as 4 km. Gold mines in other parts of the world, like Latin America, are facing dangers of being expropriated by their local governments. That dampens the enthusiasm of foreign mining firms to invest huge sums in new mines. It takes up to 10 years to get a new mine into production. If you are ever tempted to go into one of the penny stock gold exploration firms, just ask them, where will they get the tens of millions of dollars required to go into production?

In the meantime, the gold purchases by people in India and China are soaring. These two countries are 52% of all gold demand right now, vs. just 25% a few years ago.

And in the western world, the gold-holdings of the ETFs are locking up gold supplies. For example, the SPDR Gold Shares (GLD) now holds 1,200 tons of gold, stored in England. The more the buying of GLD and other ETFs increases, the more gold will be taken off of the market, i.e., the shortages increase. Secured storage facilities are running out of space. New facilities are hurriedly being built.

We are now at the point in the long term cycle where institutions are just starting to consider gold an “investable” asset worthy of their portfolios. All the other areas of the stock markets are no so closely correlated that it doesn’t matter which sector you hold.

We are still in the earlier phases of the gold bull market. In 1981, my firm predicted a 20-year bear market in gold (bottom in 2001) and then said that this would be followed by a 30-year bull market according to our cycle studies. The start of the current gold bull market was in 2001, exactly 20 years later. If my 30-year bull market cycle comes true, then there is quite a bit of excitement still ahead.

What could possibly cause that? In 1981 when we made the 30 year bull market forecast, we said we didn’t know what would cause it. Now we know: unprecedented and unsustainable debt levels of governments around the globe and a threatened implosion of the debt pyramids. The power of compounding of governmental debt alone will continue to increase that debt. It will require ever more money-creation just to service the debt. Taxes alone cannot do it. Big tax hikes will only worsen the debt problem. Compound­ing at any rate, even at 1%, is unsustainable over time. Just try it on your HP calculator.

continued on pg. 2

Forbes: Is GLD Really As Good As Gold?

November 18, 2011

Gold bars in Fort Knox, many chose the GLD ETF as an alternative to physical gold - reddogreport.com

Agustino Fontevecchia, Forbes Staff
Bringing You The Bull And Bear Case From The Markets Desk

In 2004, the launch of the SPDR Gold Trust exchange-traded fund, under ticker symbol GLD, leveled the playing field of gold investing by allowing for a less expensive option than buying the physical metal.  Ever since, many have come to equate GLD with actually owning gold, but the reality is a bit more nuanced.

GLD has grown to become the second-largest exchange-traded fund by assets, valued at $72.4 billion and backed by 40.8 million ounces of physical gold.  The subject of much fascination, GLD has also been targeted by skeptics who question the ETF’s secretive methods and even doubt it holds all the gold in HSBC’s vault in London.  Jason Toussaint, the managing director and principal executive officer of World Gold Trust Services, spoke to Forbes and sought to dispel rumors by explaining how GLD works.

Since GLD debuted on Nov. 12, 2004, it has risen more than 280% to over $170 a share.  “The whole thesis [behind GLD] was creating an efficient market for gold trading,” explained Toussaint.  The price discovery mechanism wasn’t working effectively: storage, insurance, and transport costs and logistics problems prevented efficient markets.  “The analog [to GLD] is that to buy one share of GE I don’t have to go to their sales guy, I press a button on my computer and I own it,” Toussaint said.

Investors, then, are drawn to GLD because it allows them to “own” physical metal.  Suzanne Hutchins, for example, Newton’s investment manager for global funds and head of their real return investment team (which is part of BNY Mellon), said they like gold as an inflation hedge in the face of currency debasement.  She sees GLD as one of the ways to gain exposure to the yellow metal and likes it because it is physically backed.  She told Forbes her team’s been to the vault and seen the actual bars.

But how does GLD work? It’s actually a lot more complicated than simply allowing investors to “own” gold.  GLD is a trust, sponsored by the World Gold Council (through World Gold Trust Services), which oversees the performance of the trustee, which is Bank of New York Mellon (note Hutchins works for the trustee).

The trust seeks to reflect the price performance of gold bullion by holding gold bars and issuing shares backed by their holdings of physical metal.  The gold bars are held in HSBC’s vault in London, and shares are sold in baskets of 100,000.  The ETF is marketed by State Street.  Where most investors are confused about GLD, though, is about redemption.

Even though GLD is “physically backed,” ordinary investors can’t just go to London and redeem their bullion.  Only “authorized participants” are allowed to create or redeem shares.  Authorized participants are registered broker-dealers or other securities market participants which have entered into agreements with the trustee and sponsor (these include major Wall Street names like Citi, Goldman Sachs, Morgan Stanley, JPMorgan Chase, and Merrill Lynch-Bank of America, among others), allowing them to  deposit either gold or shares in exchange for the other at unallocated accounts until the operation is completed.

Regular shareholders have no rights of redemption and the gold is not required to be insured by the Trust, which is not liable for loss, damage, theft, nor fraud.  Shares are bought in the open market, only after Authorized Participants decide to place or sell them.  Therefore a retail investors doesn’t actually “own” gold, but an asset that is backed by gold and represents a certain quantity of the yellow metal.

Skeptics have raised doubts over the trust’s management of its physical gold, with questions over how much is actually held.  HSBC, the custodian, is very secretive regarding its vault.  Earlier this year, CNBC’s Bob Pisani was allowed to see the vault only after surrendering his cell phone and taken in a van with blacked out windows to an undisclosed location.  Once in the vault, Pisani held up a gold bar and explained they were all numbered and registered.  Astutely, ZeroHedge noted the bar Pisani held up was missing from the current bar list, fueling further speculation and skepticism.

Toussaint defends GLD by noting they are regulated by the SEC.  “We are filing 10-Qs [quarterly reports with the SEC], on a regular basis,” he said, then added “I also think the world’s largest hedge fund managers take their due diligence seriously,” referring to investments in GLD by world-renowned hedge fund managers like John Paulson and George Soros, among others.

Another major criticism of GLD, which pertains to the whole ETF industry, is that it distorts prices in underlying markets by offering “on-demand liquidity to investors while they are in some cases based on much less liquid underlying assets,” according to a report by the Financial Stability Board.

“GLD has professionalized gold investment and positioned gold within the menu of viable asset classes,” responds Toussaint.  “Gold ETFs have expanded the investor base and the overall market,” explained Toussaint, “but they still represent less than 10% of total demand for gold, I don’t think it has affected price in the market.”

Global gold markets are now “extremely price effective” and “hugely diversified,” as the market feeds on several sources of demand, not just speculative investment demand.  Not only is gold a financial asset, it is also decorative, which becomes all the more important as discretionary incomes rise in India, China, and elsewhere in the developing world, where physical demand runs rampant.  “How many people buy a convertible bond and wear it around their neck, or use a stock certificate as adornment? There is no other asset class like gold,” says Toussaint.  Central bank diversification, another major source of demand, has taken a new role as central banks become net buyers of the yellow metal, according to a study by the World Gold Council.

It is difficult to pin down the exact reasons behind gold’s 10-year bull run, but the reality is that interest in gold is as old as money itself.  Be it an inflation hedge, a bet on an alternate monetary asset, or a move into a safe haven, GLD is one of the most popular ways to gain exposure to the yellow metal.

Owning GLD is clearly not the same as owning physical gold, it just serves different purposes.  GLD allows investors to play the physical metal without facing the underlying costs and logistical problems, but it doesn’t entitle one to an actual amount of gold. GLD helped make the market more democratic, to a certain extent, but also injected liquidity, thus fueling further price volatility.  No matter what Toussaint  or anyone else says, there will always be skeptics, but as long as gold maintains its trajectory, GLD will continue to thrive.


CNBC: For Asia’s Rich, All That Glitters Is Still Gold

November 7, 2011
Published: Thursday, 3 Nov 2011 | 11:07 PM ET
By: Shivali Nayak
News Assistant

For Asia’s millionaires, growing at a whopping pace, gold continues to be a lucrative investment—and never mind the volatility.

Over the past two months there have been huge swings in gold prices. In September, gold prices peaked above $1,900 an ounce, dropped briefly below $1,600 by month-end and are now hovering around the $1,700 mark.
Despite these price fluctuations, gold has been an outperformer within the precious metals complex, say wealth managers.

“The spot price has almost tripled in the last five years. Also, the performance of gold since the end of June and the beginning of September this year marked the strongest quarterly gain in spot prices since the early 1980s,” says Poh Huay Imm of Deutsche Bank Private Wealth Management.

Therefore, it is no surprise that gold has been occupying more weight in the investment portfolios of Asia’s millionaires.

Many wealth management experts told CNBC they would recommend gold make up at least 5 -10 percent of an investment portfolio.

“Gold is a good insurance against a “time bomb” in Europe and further debasing of currencies by central banks globally,” says Mark Matthews, Head of Research Asia at Bank Julius Baer.

“Gold is a good insurance against a ‘time bomb’ in Europe and further debasing of currencies by central banks globally.”

There is no “central bank for gold” so there can be no price intervention, making it more appealing to investors, says Erik Wytenus, Head of Foreign Exchange and Commodities at J.P. Morgan Private Bank in Asia.

High Net Worth Individuals (HNWIs) look toward gold in times of economic uncertainty when they are not adequately rewarded in fixed-income, says Dominic Schnider, Head Commodity Research at UBS Wealth Management.

Many HNWIs in Asia have been playing the volatility in gold prices seen over the past few months, say wealth managers.

“Between early July to late September this year, when gold prices were more volatile, clients have taken advantage of this through selling put options and staying bullish on one-year structured notes,” says Wytenus of J.P. Morgan Private Bank.

“On the other hand,” he adds, “some other clients have continued to buy outright into weakness on gold.”

Asian investors are naturally disposed to holding gold in their portfolio, says Shrikant Bhat, Head of Wealth Management at Citibank, Singapore. And holding physical gold has been the tradition. But now, say wealth managers, Asia’s savvy high net worth investors are looking increasingly at gold exchange-traded funds (ETFs)“Physical buying has been lighter than financial buying, as we see less fear about the stability of the overall financial system,” says Wytenus of J.P. Morgan Private Bank.

For example in India, the world’s largest consumer of bullion and still a predominant market for physical gold, volumes in gold ETFs have reportedly grown 164 percent over the past four years.

Going forward, wealth managers see gold continuing to add value to investor portfolios. Schnider of UBS Wealth Management recommends investors hold gold for the long term, as “gold is more than a commodity; it is a currency.”

While Lim Say Boon, Chief Investment Officer at DBS, says gold could push higher toward the $2,000 level as “there are no signs that negative real interest rates and volatility in the currency markets, which are some of the main drivers of gold prices, are about dissipate.”


Gold: Physical Pricing Could Disconnect From ETF’s

July 21, 2011

Gold & silver have pricing that is tied to the largest ETF’s for each metal. These prices as we have commented numerous times are driven by the physical demand for metals along with inflationary fears in the developing markets like China & India. There is also the debt crisis in the US & EU bringing droves to the safe-haven metals.

One of the results of these pressures on metals is that there might be a deviation between the physical metals pricing & the ETF pricing. There has been a surge of ETFs to gold, Robbert Van Batenburg Head of Global Research, Louis Capital Markets told CNBC, At some point, this is going to put so much stress on the system and I fear regulatory zeal will be drawn towards these ETFs at some point.

Some are calling for gold to have a market unto itself much in the same way the NASDAQ started for tech stocks.  Irakli Menabde, founding partner of fund manager M2 Capital Partners commented on CNBC, The gold physical market is more about the defensive nature of gold, but a gold stock market would also deliver dividends and surging share prices.

He further said, We have seen the decoupling between the gold price and gold stocks, and at some point we will see the divergence between gold stocks price and physical price. This is the natural course of events, the ETF markets will be speculated & over purchased due to the leveraging of their ownership of stocks to actual physical ownership of gold.

How this will look no one knows but my thoughts are ETF’s will bubble above physical metals then collapse. (Think Indy-Mac & Enron) In the end it will be those who have physical possession of their metals that will be the winners.

Read further: CNBC- Gold Could Go Much Higher: Investor


CNBC – Gold Could Gain 30% by Year-End: Fund Manager

April 5, 2011
 

Ben Davies, Director and CEO of Hinde Capital

Published: Monday, 4 Apr 2011 | 3:25 AM ET

By: CNBC.com

Gold prices took a tumble in late January, but have since been going from strength to strength. Spot gold has risen 6.5 percent since January 28th. One fund manager thinks the precious metal has more upside as it remains undervalued.

Ben Davies, Director & CEO of Hinde Capital which runs a physical bullion fund thinks if gold [XAU=  1441.6899 5.14 (+0.36%) ] prices break past $1,440 in the coming weeks, they could make a $400 run to hit $1,840 by the end of the year. That represents a nearly 30 percent gain from current levels.

Davies said that with just 0.7 percent of global assets invested in gold, the precious metal remains under-owned.

With the end of the gold standard, central banks haven’t had to load up on gold despite big increases in the monetary base. “Governments, they don’t want to see the price of gold going up, because in reality it’s showing that you’re debasing your currency,” he explained.

Davies argued investors need to ditch the view of gold as a barbaric relic and start seeing it as a real asset, as it has the positive attributes of both a commodity and money.

The lure of gold is also apparent in the popularity of exchange traded funds or ETFs, which track the underlying asset’s performance. The world’s largest gold ETF – the SPDR Gold ETF gained 29 percent last year. However, Davies said ETFs are an inefficient way of investing in gold. “You’re buying a paper construct, you’re not buying the real deal. So you’re exposing yourself to liability, to counter-party risk.”

Last year, the Hinde Gold Fund outperformed the SPDR Gold fund, gaining around 40 percent.

According to Davies the best way is to invest directly in the physical metal itself, with ideally a third of a portfolio in gold. However, that level may still be too high for some fund managers, in which case he says a good starting point would be around 10 percent.