Jim Rogers Blasts the Dollar & Goes Long in Gold

May 16, 2012

Yesterday, commodities expert Jim Rogers of Rogers Holdings spoke on CNBC ‘s  First On show about Gold, the Dollar & a variety of other economic concerns. He gave support to Gold in the long term stating, Gold has been in an 11 year rally it is due for a correction, but it is not finished making gains long term. He went on to further state the Dollar is a horrible currency and every one  hates it, but in times of crisis people run to it as a safe haven which is the wrong thing to do.

Finally on QE3 he said the Fed & Bernanke will print money it is all they know to do. It is the wrong thing to do but they will do it anyway. They are printing money now but they are not calling it QE3. With all of this happening and the precious metal/rare coin markets at the lowest premiums in decades now is the buying opportunity not seen since 2002 when gold was trading below $300.  To quote Rogers, 2013 is going to be a huge mess & 2014 will be a real mess. 

Watch the full interview here:

CNBC – Dollar Losing Out to Gold in Safe Haven Race: Goldman

May 10, 2012
Published: Thursday, 10 May 2012 | 11:40 AM ET
By: Antonia van de Velde
CNBC.com Deputy News Editor

Following disappointing economic data from the United Statesand more volatility from elections in Europe, demand for gold will remain resilient, and the precious metal will not lose its appeal as the currency of last resort, Goldman Sachs said Thursday.

Goldman said it was sticking by its bullish forecasts, and said the precious metal could still hit $1,840 within six months.

“We believe it is too early for the US dollar to reclaim this status [of flight-to-safety asset], as the original U.S. dollar concerns have not disappeared,” Goldman analysts wrote in a note to clients.

Despite the turmoil in Europe and weak employment data in the U.S., gold has not acted as a safe haven in recent days. Spot gold [XAU=  1595.10    4.65  (+0.29%)   ] fell to its weakest level since early January on Wednesday. It is currently trading around $1,597 an ounce.

Barclays analyst Suki Cooper told CNBC that gold has struggled because of the physical market. “It has proved to be much more fragile than it had last year. Last year, we saw the two key buyers,IndiaandChina, continuously coming in to support those dips,” she said.

But like Goldman Sachs, she still thinks the macro backdrop is gold-favorable.

“Despite this recent pullback, which has brought into question gold’s status as the currency of last resort, we believe that the case for higher gold prices remains in place,” Goldman said.

It added that weakerU.S.growth, renewed European sovereign risks and resilient physical demand all pointed to higher gold prices.

Several events could trigger a sharp inflow into gold, according to Goldman.

It cited further declines in consensus expectations for U.S economic growth, which remain above its own economists’ forecast of 2 percent for 2012, as a first trigger.

Additional monetary easing at the June 19-20 Federal Reserve meeting and rising concerns in the wake of the Greek and French elections could also move gold prices higher.

Goldman also pointed to the potential for strong Indian gold buying following the withdrawal of an excise tax on precious-metal jewelry there.

“The weakness in the rupee has meant that the local price has been quite elevated. … There is some pent-up demand there. … We would expect that demand to improve in the year,” Cooper said.

Goldman said that until such catalysts materialized, it expected gold to continue to trade “with a lack of conviction and remain well correlated to the broad based US dollar.”

Forbes: Gold Set To Fall To $1,550 As Need For Macro Risk Hedge Dissipates

March 20, 2012
Agustino Fontevecchia, Forbes Staff
Bringing You The Bull And Bear Case From The Markets Desk
Markets | 3/19/2012 @ 4:18PM

Gold suffered what appears to be long-lasting damage since the onset of March, with prices falling nearly 7% from 2012 highs.  As Treasury yields surge, markets have entered a new phase marked by generalized optimism, where fears over economic weakness and of an implosion in the Eurozone have receded.  These are ominous signs for safe havens, and gold has gotten clobbered, forcing UBS’ Edel Tully to lower her one-year price target to $1,550 an ounce, a 12.7% downgrade.

Still, the yellow metal could once again look attractive if any of the major risk scenarios play out, or if the Fed signals it has no intention to begin “normalizing” policy.  QE3-or any form of additional easing-, rising inflation, or a major oil price shock should add fuel to gold’s decade-long rally once again.

Gold was trading up 0.4% to $1,625.80 an ounce by 4:18 PM in New York.  Only two weeks ago, the yellow metal was up above $1,700.  On the flip side, 10-year Treasury yields, which were as low as 1.8% in early February, are now up to 2.38% and promise to move higher (Nomura’s short-to-medium term outlook is 2.4%, possibly overshooting to 2.5%).

Last week’s violent Treasury sell-off marked the shifting of a market paradigm.  Forcing the Fed to acknowledge the improving economic landscape, February’s jobs report signaled a strengthening recovery.  Greece’s widely expected default has momentarily taken Europe’s sovereign debt crisis off investors’ radar screen, while the economic outlook for the Eurozone looks less bleak, with UBS’ 2012 GDP estimates now between -0.4% and -0.7%, suggesting a milder recession than expected.

What does this mean for gold?  It means investors have lost their appetite for a macro tail risk hedge, according to Tully.  Concerns over sovereign credit and inflation have eased, and investors have begun to question the Fed’s intention to maintain ultra-loose monetary policy.  Expectations for QE3 have pared back, with some market players expecting rate hikes to begin before the Fed’s pledged late-2014 time-frame.  UBS’ macro analysts expect policy normalization to begin in mid-2013.

Thus, Tully has cut her one year target to $1,550 an ounce; UBS’ 3-month target was axed from $1,950 to $1,600.

In terms of market fundamentals, both physical and speculative buyers have failed to step up.  China has lowered its growth outlook and India has recently raised its import duties on gold, which, coupled with a weakening rupee, is structurally bullish for the yellow metal.

With physical demand failing to step in to help put a floor under gold, the investment community has taken the opportunity to short the yellow metal, rather than buy cheap, Tully explains.

Does this mean game over for gold’s multi-year bull run? No, says Tully.  The Fed, along with other major central banks, have seen their balance sheets explode as they inject liquidity into the system, while central banks in emerging markets are beginning to ease in the face of a global slowdown.  There are no indications the Fed will begin to hike rates any time soon, particularly given the dire state of U.S. housing markets, and real interest rates in many regions are still negative.

The elephant in the room, though, is the rising price of crude oil.  WTI was trading around $107.7 per barrel while international crude benchmark Brent recently hit all-time highs in euro terms.  An Israeli-Iranian conflict still threatens to disrupt flow through the Strait of Hormuz, while the structural supply-demand balance remains tight.

Continued on Pg. 2

Forbes – Gold’s Triple Play: Volatility, Currencies And Europe

November 28, 2011
Great Speculations
Buys, holds, and hopes
Frank Holmes, Contributor

Resurgent investment lifted global gold demand 6% from the previous year to just over 1,000 tons during the third quarter of 2011, according to the latest Gold Demand Trends Report from the World Gold Council (WGC).

The potent cocktail of inflationary pressures in the emerging world and the European sovereign debt fiasco left investors searching for a safe haven that they found in gold.

In an uncertain era when many asset values are declining, gold has thrived. Gold prices averaged $1,700 an ounce during the third quarter of 2011, 39% higher than the same time last year and 13% above the previous quarter, according to the WGC.

In total, investment demand increased 33% on a year-over-year basis to reach the third-highest quarter of investment demand on record, says the WGC. The increase was broad in scope. Investment in gold bars and coins jumped 29% year-over-year while holdings in gold ETFs reached an all-time high.

All global markets other than India, Japan and the U.S. experienced gains in investment demand; many of them (except Thailand and Saudi Arabia) saw double-digit increases.

While investment demand thrived during the third quarter, jewelry demand fell victim to the quarter’s economic fragility and price volatility—falling 10% on a year-over-year basis. Only four markets—China, Hong Kong, Japan and Russia—saw jewelry demand increase.

The WGC says a shift toward high-growth economies is “undeniably conspicuous in the gold market.” Nowhere in the world is this more evident than in China, where consumer thirst for gold appears unquenchable. China’s total demand, around 612 tons year-to-date, has already eclipsed that of 2010. In addition to domestically consuming every speck of gold mined in China, it’s estimated that the country’s gold imports could reach 400 tons in 2011. That’s roughly equal to the combined tonnage of gold demand for the Middle East, Turkey and Indonesia in 2010, and that’s just imports.

Consumer demand for gold in China increased 13 percent (year-over-year) during the third quarter as the country continues to close the gap on India. Chinese jewelry demand, also up 13 percent, eclipsed India for only the fourth time since January 2003. Combined, the two Asian giants account for over 50 percent of global jewelry demand.

The WGC says, “China’s increase in demand is being fueled by rising income levels, a by-product of China’s rapid economic growth.” This growth has given birth to more than 100 million gold bugs in China’s rural areas. China’s smaller third- and fourth-tier cities were responsible for the bulk of the increase in jewelry demand, the WGC says. In addition, the Gold Accumulation Plan (GAP), a joint effort from the Industrial & Commercial Bank of China (ICBC) and the WGC which allows investors to purchase gold in small increments, reached 2 million accounts in September. The WGC says GAP sales have already exceeded 19 tons so far this year.

Things weren’t quite as rosy for demand in the world’s second-largest jewelry market. Indian jewelry demand took a 26 percent hit as volatility in the rupee shook investor confidence. The rupee decreased 9 percent against the U.S. dollar during the third quarter, more than double the currency’s average quarterly move over the past five years.

Historically, Indian jewelry demand bottoms in July-August, before picking up heading into the Shradh period of the Hindu calendar. That didn’t happen this year because Indian consumers were discouraged by high and volatile prices. The WGC says:

Consumer confidence in India has been knocked by the persistence of high domestic inflation rates. Inflation of almost 10 percent, as measured by the Wholesale Price Index (WPI), adversely affected jewelry demand, through its impact on both disposable income levels and general consumer sentiment.”

Currency Effect on Gold Prices

The weaknesses of the rupee against the U.S. dollar also negatively affected India’s demand. This chart illustrates the dramatic effect currency fluctuations can have on gold prices.

The gold price in Indian rupees has appreciated over 31 percent since June 30, more than three times the price appreciation denominated in Japanese yen. This means that a consumer looking to buy gold in Japan would have three times the purchasing power to buy gold at their local dealer than an Indian counterpart.


CNBC: Gold Slips to One-Week Low on Contagion Fears

November 17, 2011
Published: Thursday, 17 Nov 2011 | 10:42 AM ET
By: Reuters

Gold fell to a one week low on Thursday as fears that the euro zone debt crisis could spread from peripheral to core economies kept investors nervous and prompted some to liquidate profitable positions to cover losses in other asset classes.

The cost of insuring Spanish and French five-year government debtagainst default rose to record highs and the spread between French 10-year government bonds and their German equivalents jumped to a fresh euro-era high on fears the debt crisis was deepening and spreading to the larger euro zone economies.

A spat between France and Germany on Wednesday over whether the European Central Bankshould intervene more forcefully to halt the euro zone’s accelerating debt crisis raised doubts about the euro leaders’ capability to find a solution.

“There is a bit of general risk-off across the markets as we wait for further developments of the euro zone crisis, a bit of currency influence and a bit of opportunity as certain people try to crystallize their gains,” said Nick Moore, an analyst at RBS Global Banking & Markets.

“We know one or two big funds have been exiting, having had very good profits … The gold market itself is in very good form, though; there is nothing wrong with fundamentals,” Moore said.

Spot gold [XAU=  1742.09    -20.20  (-1.15%)   ] edged down 1.04 percent to $1,743.89 an ounce. Gold futures [GCCV1  1743.60    -30.70  (-1.73%)   ], meanwhile, slipped 1.56 percent to $1,746.70 an ounce.

Weighing on gold, the dollar rose against a basket of currencies.

A stronger U.S. currency makes dollar-priced commodities, such as precious metals, costlier for holders of other currencies.

Gold has confounded market watchers by refusing to behave like a safe haven and instead has tracked equities over the past few weeks, but the escalating European debt crisis could see bullion ditch its risk-asset mantle and return to record highs.

Analysts said that the long-term outlook remains solid for gold, as physical demand is increasing with investors and banks looking to stock up on secure assets.

Bullish Data

Demand for gold rose by 6 percent to a 1 1/4 year high in the third quarter of 2011, driven by central bank purchases and European demand for bullion against the backdrop of the escalating euro crisis, according to a report by the World Gold Council (WGC).

After a 20 percent slump in the third quarter from the previous, gold imports to India, the world’s biggest consumer of bullion, are likely to recover in the last quarter of 2011 as demand emerges from traders who destocked in the third quarter of the current year, the World Gold Council’s India head said.

“Crucially, in today’s report, the WGC note that additional purchases were made by a number of countries’ central banks, which cannot currently be identified due to confidentiality restrictions,” UBS said in a research note.

“The gap between the known purchases and the confidential ones is very significant … This information is very bullish. And no doubt the market will be busy speculating on the identity of such buyers,” the company wrote.

Even a move by hedge-fundmanager and long-time gold bull John Paulson to slash ETF bullion holdings by a third does not appear to be a sign that he is abandoning his upbeat view of the metal, industry sources and analysts said.

“Paulson may be moving to gold equities or physical gold. After all, even with ETFs there is counter-party risk,” Bhar said. “He may be switching holdings from one gold vehicle to a safer gold vehicle.”

Holdings of the largest gold-backed exchange-traded-fund (ETF) , New York’s SPDR Gold Trust [GLD  169.45    -2.06  (-1.2%)   ] climbed 0.72 percent from Tuesday to Wednesday, while that of the largest silver-backed ETF, New York’s iShares Silver Trust [SLV  31.8826    -0.9374  (-2.86%)   ]  remained unchanged for the same period.

Spot silver [XAG=  32.80    -0.88  (-2.61%)   ] last fell 2.43 percent to $32.86, platinum [XPT=  1601.74    -10.91  (-0.68%)   ] was down 0.46 percent to $1,605.24 an ounce and palladium [XPD=  625.97    -18.75  (-2.91%)   ] fell 2.56 percent to $628.22 an ounce.

Forbes: Applying The Numbers To Gold Supply And Demand

November 8, 2011

2% “fabrication premium” we have today for bullion coins like American Eagles is similar to jewelry premiums in Asia.

Nathan Lewis, Contributor
I write about monetary and tax policy for the 21st century.

One thing you often hear about gold, as a monetary asset, is that the supply of gold – the amount of gold in the world – increases by about 2% each year due to mining. We don’t really consume gold. Most of the gold that has ever been mined (the U.S. Geological Survey estimates 85%) still exists today as bars, coins and jewelry. Even the small bit that is used in industry is often recycled.

The next thing you typically hear is that a gold standard system works because the “money supply” increases at a stable rate, in line with mining production. In other words, the rate of growth of quantity is stable.

This is totally incorrect. If you look at any historical gold standard system, such as the Bank of England in the 1880s, you find that the “money supply” (base money) is in fact quite variable, and doesn’t follow this “2% per year” rule at all.

For example, in 1900, the U.S. monetary base increased to an estimated $1,344 million, from $1,126 million in 1899. That’s an increase of 19.4%.

In 1896, however, the U.S. monetary base fell to $944m from $1,022m in 1895, a decrease of 7.6%.

There’s nothing stable at all about the “money supply” with a gold standard system. It adjusts, automatically via the value parity, to the economic conditions of the time.

The “stable” part is stable value. The British pound maintained a defined value compared to gold. Gold, likewise, maintained a stable value in part because the supply was very large and stable.

Here is one of our favorite 19th century references, John Stuart Mill, on the subject:

“[O]n the whole, no commodities are so little exposed [as gold and silver] to causes of variation. They fluctuate less than almost any other things in their cost of production. And from their durability, the total quantity in existence is at all times so great in proportion to the annual supply, that the effect on value even of a change in the cost of production is not sudden; a very long time being required to diminish materially the quantity in existence, and even to increase it greatly not being a rapid process. Gold and silver, therefore, are more fit than any other commodity to be the subject of engagements for receiving or paying a given quantity at some distant period.”

Let’s look at some of the recent specifics. How is gold different than copper?

Continued on Page 2

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.


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