Gold Leveling Out Amid Turbulent Markets

October 5, 2011

Gold’s current state makes the average investor take pause and consider the wisdom of this as an investment class. This is mind boggling with the current volatility in the markets & the debt crisis in Europe and the U.S. Then yesterday, the Fed Chair Ben Bernanke told Congress he is prepared to do what ever is needed to avoid a double dip recession.

All of these are good for the long term of gold.The environment for gold is still kind of perfectRonald Stoeferle, gold analyst at Erste Group told CNBC. We have negative real interest rates more or less all over the world, there’s extreme systemic risk, and there is a very fundamental need for a safe-haven currency. Gold is one of the few investments that fits the bill as a long term safe haven and is real currency.

Gold will continue in the short term to have some potential for more movement beyond the traditional safe-haven position. The long term fundamentals are as solid as they have been for the last decade. We’re still up (16.5 percent) in 2011. Compared to the equity markets, that’s a pretty nice out-performance,  Stoeferle further added on CNBC Corrections like this are healthy for the long-term uptrend.


Current Gold Volatility: No Reason To Panic

September 30, 2011

Gold is enjoying one of the longest Bull-runs in modern history, with over a decade of price increases. Those who acquired Gold during this time have enjoyed some of the best returns anywhere on any investment. Even at the current trading price of $1630.20 per oz. Gold is still up 15% for the year to date.  This out performs the S&P 500, the Dow & most other investments (including a number of hedge-funds).  There are exceptions of individual stocks doing better but the losers have outweighed the winners for the year to date. In layman’s terms, Gold has been one of the safest investments in the last year & decade.

During times of price volatility as happened over the last month many smart investors lose sight the facts and let emotion dictate their investment strategy. Directly speaking they panic, we all know the price one can pay when panic ensues. Think about Apple stock in 1996 nobody wanted it and were getting out. Yet, a simple $14,000 investment would net a $1.5 mil return today. It is the savvy investor who keeps a cool head allowing the panic of the masses to be an opportunity to improve their position in any investment.

Let us consider the facts:

  • What makes a Bull-run end?  The start of a Bear market. According to The Vanguard Group, While there’s no agreed-upon definition of a bear market, one generally accepted measure is a price decline of 20% or more over at least a two-month period. Gold has retracted 18% from its high earlier this month it is still above the close of $1,627 on July 29th. (two months ago)

  • Why is the price dropping?  Gold is being sold to cover losses and margins by major hedge-funds & Wall Street(see A Gold Rush Wanes). These sales are similar to the sell off of Gold holdings that took place to cover losses at the beginning of the Great Recession in 2008.  During that same period of time Gold prices also retracted.

  • September & October are the worst months for the markets is this the signal for another Recession? The average recession cycle is 3 to 5 years between each downturn. Some experts claim we are already well into a double-dip recession while others claim we are just in a slow recovery & growth period. In any case, while the price of Gold can be affected by downturns in the economy the over-all demand and pressure on Gold should continue to give positive returns. For the first time in 20 years all banking sectors are net purchasers in Gold. The Debt Crisis in the U.S. & Europe continues with little resolution that would change the need for Gold as a safe-haven investment. Finally, the demand by an emerging middle-class in China & India is growing to the point of almost 75% of all Gold mined is consumed by these two countries. September through the end of the year is the traditional wedding time in India now is the time they make a majority of purchases.

  • Does the Dollars recent rise have any effect on Gold’s price drop?  Absolutely! The Dollar’s recent climb out of all-time lows is contributing to the Gold price retraction. The Fed & EU banks recently made a plan to keep liquidity of the Dollar available to European banks with out question & at reduced rates for the next three months. This means the U.S. is preparing to help bail-out Europe’s banks with our money. This is good for the buying power of the Dollar in the short term. Long-term it can possibly lead to a default with the tax-payer holding the bag. Gold suffers on pricing in the short term while the long term outlook is bright and shining.

We have always encouraged our clients to consider every retraction as a buying opportunity. We still believe this is true! While no one can tell the future we believe the fundamentals of Gold are as solid today as they were over the last decade. What is happening today is healthy for the long term growth of the metals market. There may continue to be some rough days in the Gold pricing still ahead. Until there is a fundamental change in the global economy that shows a marked improvement Gold will be the only real money you can own today.

Official SEC Filing: Soros Sells-Out of Metals

May 17, 2011

Monday the rumors of George Soros’s hedge fund, Soros Fund Management, liquidating their position in gold & silver were confirmed by first quarter SEC filings.  Soros held $774 million in gold holdings at the end of the 4th quarter 2010. According to the current filing he is at less than $7 million.

This makes sense when you consider that Soros position was to hedge against deflation.  It’s pretty hard to make the case for deflation right now so if that was a reason you were buying gold, you should take this signal from Soros, Mark Luschini, chief investment strategist at Janney Montgomery Scott in Pittsburgh told CNBC.

Soros current position, at one tenth of his previous value, may have contributed to the current retraction in metals.  Many experts see his repositioning as the canary in the gold-mine, spelling doom on the current values of gold & silver.  Except at the current global valuation of gold, around $8.5 trillion, the $768 million sell off by Soros is less than one tenth of one percent.  Far out stripping Soros sell off is the total net purchases all the central banks.

The fundamentals for metals is strong, with the underpinning of demand, US National Debt, emerging markets & inflationary worries metals will continue to move forward. Metals traditionally enter a period of retraction during the summer months, meaning the next couple of months may see metals languish at current levels. This makes for an opportunity to strengthen your position in metals.

Take the time to look into your Tangible Asset Portfolio and consider adding during this current retraction.  While George Soros position is something to be watched it is not Chicken Little and the sky is falling – Or maybe it is just that.

Soros Pulls Out, Deutch Bank Predicts $2,000 Gold

May 12, 2011

George Soros, billionaire financier, fund manager & philanthropist

The Wall Street Journal reported that Soros Fund Management LLC sold precious- metal assets, this fund is managed by George Soros a leaders in gold & silver investments. This has sent the metals world a buzz with speculation that Soros indicated the high in metals, stepping back to re-evaluate his position.

Mean while John Paulson & others stand pat seeing this as part of the natural ebb and flow of the market. I’m bullish on gold despite its current levels, Hal Lehr, Deutsche Bank’s managing director for cross-commodity trading, said in an interview in Buenos Aires. It could reach $2,000 an ounce in the next eight months. This is a bold prediction with gold sliding just below the $1,500 mark.

Metals continue today to show some signs that they are ripe for acquisition. While we believe that $2,000 is attainable given the current pressure on metals we might conservatively estimate closer to $1,800. In either case the prices today will be a bargain when gold attains those levels. Now is a great time to invest while the prices are still low.

Read further – Bloomberg: Deutsche Bank Sees Gold Rising as High as $2,000 as George Soros Pares Bet

Here Today, Gone Tomorrow

April 19, 2011

Baby-Boomers plan to take it all with them.

The Baby-Boomers are on track to become the first generation whose children will be worse off than there parents.  In a disturbing survey by US Trust, a subsidiary of Bank Of America, 51% of the 475 high net-worth investors said it was not important to leave their kids an inheritance.  Keith Banks, US Trust President, told CNBC, These are mainly self-made people… they think I’m going to get a return on that investment for myself, number 1, and maybe my children down the road. This mind-set prevails to the highest levels of business & government.

The burden of debt left to the next generation just from the current commitments of the US government domestically & globally will have the the national debt in excess of $20,000,000,000,000 by 2020. That means about $50,000 will be owed by every man, woman & child in the US by 2020. The Boomers seem to be concerned about today and letting the next generation take care of the mountain of debt left after they are gone.

Probably the most disturbing fact from this survey is the total lack of planning even for the Boomers own future.   88% of those surveyed have an estate plan in place, yet, nearly 39% acknowledge their estate plans are not comprehensive. Finally, 43% do not have a financial plan that factors in the impact of long-term health care on family wealth. It is the lack of foresight by this generation that has led us to the brink of financial collapse.

Foresight & planning are the hallmarks of all Tangible Asset Portfolios.  Thoroughly thought-out investment in a TAP can make all the difference  in your future financial security. Whether it is for wealth preservation to pass onto your children or to cover the inevitable cost of health-care in retirement, the financial security you will achieve will make the difference in the next generations ability to face the coming debt crisis.

Read more: CNBC -Boomer Wealthy Saving Inheritance For Themselves: US Trust

Precious Metals Move Forward

April 15, 2011

JohnPaulson founder and president of Paulson & Co.

Print more Dollars and watch the price of metals continue to climb into the stratosphere. In the near future there will be talk of new record highs, while accurate in dollars, as adjusted for inflation we are well below the highs in the early 80’s.  John Paulson the founder and president of Paulson & Co., a New York-based hedge fund, told Les Echos, Over time, the price of gold will rise in proportion to the creation of paper dollars. In an inflationary environment where the demand for protection increases, the price of gold can rise even further.

Paulson commented further on fiat currencies with, In these times of uncertainty for paper based currency, I feel more secure in holding gold. Given the risks of inflation in three to five years and the volatility of the euro, gold offers good protection against the paper currencies devaluation and even the possibility of generating a return on fixed investment. As one of the best fund managers over the last 7 years, his bullish position in gold has allowed for some of the largest gains in the history of hedge funds.

We often talk about gold as a safe-haven for investors to protect a portion of there total net worth.  There are a number of forces that contribute to golds safe-haven status; demand, inflation & global unrest are just a few. Paulson gave his thoughts on this, Historically, gold has always been a safe haven against inflation and a safe haven in times of political instability. Today we face both risks.

To read the entire interview: Zero Hedge -John Paulson’s Complete Les Echos Interview

Unstable Markets Lead Three Hedge-Funds to Return Investments

March 28, 2011

Carl Icahn, Chris Shumway, & Stanley Druckenmiller

If you wonder how stable the global financial markets are you have to look no further than 3 of the best hedge-fund managers on Wall StreetCarl Icahn, Chris Shumway, & Stanley Druckenmiller are all bailing out of the hedge-fund business.  Each one in the last quarter gave back all outside investors holdings, the latter two have left the fund managing business entirely. What does this say for these managers? More importantly, what is it saying about the current markets?

Each one of these guys are some of the best at what they do: make huge sums of cash for those who have huge sums of cash. All three site fatigue & the unstable markets as the reason for divesting from outside investments. Apparently, the pressure is getting to them and they only want the responsibility of there own personal interests. This on the surface is very understandable, but more to the point, maybe discretion is the better part of hedge-fund management. Better to chicken out now than let the market cook their collective goose?

The take-home for you, Joe Investor, buyer beware! Since, some of the brightest & best at the Wall Street game are bailing out then you should also consider your current position in the market.  Should the market take another swan dive or a double dip much in the way it did in the 1930’s, the best place you can hedge against the losses would be in the ownership of physical gold & silver.  We recommend a conservative 10% to an aggressive 20% of your total net worth invested. These figures should cover any losses incurred just as it has over the last two downturns.

The Canaries of Wall Street are dropping like flies, take their que,  strengthen your position with the financial insurance that is your very own tangible asset portfolio.