Gold Bulls Extend Streak as Prices Jump on Fed’s QE3 Program

September 20, 2012

Gold traders extended their bullish streak as analysts from Bank of America Corp. to Deutsche Bank AG forecast record prices by next year after central banks pledged more action to bolster economic growth.

The Federal Reserve announced a third round of debt-buying Sept. 13 and the Bank of Japan said two days ago it will add 10 trillion yen ($128 billion) to a fund that buys assets. The European Central Bank announced an unlimited bond-purchase program Sept. 6 and China approved a $158 billion subways-to- roads construction plan. Gold rose 70 percent as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011.

“Gold is one of the commodities that will benefit most from quantitative easing,” said Kamal Naqvi, the head of commodities sales in Europe, Middle East and Africa for Credit Suisse Group AG in London. “Everyone is talking about gold at $2,000 an ounce and I still think we’ll get to at least that.”

Gold rose 13 percent to $1,765.35 an ounce in London this year, reaching a six-month high on Sept. 19 and extending 11 consecutive annual gains. 

Gold will climb to $2,000 by the second quarter and will reach $2,400 by the end of 2014 if the Fed’s latest easing lasts until then, Bank of America said in a Sept. 18 report. Prices will exceed $2,000 in the first half of next year, Deutsche Bank wrote that day. Morgan Stanley expects gold to average $1,816 next year and Standard Chartered predicts a second-quarter average of $1,900. Both would be the highest ever.


Investors Beware: Counterfeit Gold Bars Surface in New York

September 19, 2012

Hard asset investors must beware: counterfeit gold bars have surfaced in New York. Fox News has the story linked below…

…but investors need to know that the best way to avoid the risk of counterfeiting in hard asset investing is to buy gold in the form of PCGS– and NGC-certified gold coins. These two respected grading services guarantee the authenticity of the coins that they certify and encapsulate in sonically sealed “slabs,” thus removing the risk of counterfeiting for individual investors…

Fool’s gold: Counterfeit bars turn up in New York

A jeweler in Manhattan’s Diamond District learned the hard way that all that glitters is not gold.

Ibrahim Fadl, a chemical engineer who owns a business near 47th Street and Fifth Avenue, bought four 10-ounce gold bars and decided to check them out further since he heard counterfeits were making the rounds, reports.

Fadl, who paid $100,000 for the merchandise, drilled into several of the bars and found gray tungsten, which has nearly the same density as gold, making it difficult to detect. The same thing reportedly happened in Great Britain earlier this year, and finance blog reported that in 2010 German refiner W.C. Heraeus claimed to have received a 500-gram bar from an unnamed bank that proved to be filled with tungsten.

The scheme purportedly involves a genuine gold bar that is purchased with serial numbers and authentic documents and is then hollowed out to be replaced with tungsten. The bar is then closed up to finalize the sophisticated operation, the website reports.

Manfra, Tordell & Brookes, the Swiss manufacturer of the gold bars, warned customers to only buy from reputable dealers. Raymond Nessim, the company’s CEO, said he has reported the incident to the FBI and the Secret Service.

Secret Service officials, meanwhile, told an investigation is ongoing, declining further comment.

Fadl, who could not be reached for comment, told that the shell of the gold was sold to him by a customer at his gold refinery business and peeled off like foil on a candy bar.

“It’s got to be somebody really, really professional,” Fadl told the website. “When I analyzed them, it showed they were tungsten.”

Fadl said a colleague tipped him off to the scam, prompting him to further inspect the gold bars.

“Sick to my stomach, but thank God we didn’t sell this to somebody,” he said when asked how he felt. “People are selling their homes to buy gold, it’s a big issue.”

Bank of America/Merrill Lynch: Gold headed to $2400/oz

September 18, 2012

When Wall Street starts admitting that gold is headed higher, it’s time to start doubling up on your gold investments.

Today Bank of America/Merrill Lynch weighed in on Fed monetary policy by proclaiming that it will send gold to $2,400 an ounce from its present price of around $1,770.

That’s a 36% increase. Not only that, the firm is calling for higher gold prices through the end of 2014…

In one of the most bullish gold calls since the Federal Reserve announced a new round of easing last week, one strategist sees a 36 percent jump in the metal’s price to $2,400 an ounce, by the end of 2014.

“The new target reflects our view that the Fed will maintain mortgage purchases until the end of 2014 and will move to buy Treasuries following the end of Operation Twist this coming December,” wrote Francisco Blanch, a global investment strategist with Bank of America Merrill Lynch, in a note to clients Tuesday.

“Given the new open-ended nature of QE3, the upward pressure on gold prices should continue until employment is strong enough to require a change in policy,” Blanch added. “In our view, this is unlikely to happen until the end of 2014.”

Gold is up two percent since the Fed’s statement as others besides Bank of America pile into the metal on fear these actions may spark inflation and leave the metal as the only store of value in a world of paper currencies.

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Morgan Stanley: QE3 even more bullish for gold

September 17, 2012

Morgan Stanley was already bullish on gold for the remaining portion of 2012, but the advent of QE3 by the Federal Reserve pushed the firm even more fully into the bullish camp on gold.

“The size and strength of the recent upside move in gold is reflective of decisively changed perceptions of Fed policy going forward, in our view,” Morgan Stanley says. “Effectively, QE3 for as long as it takes and close to zero interest rates for another three years is, we contend, markedly different from Operation Twist and only two more years of ultra low rates. The Fed also made it clear that it would pursue easy monetary policy ‘for a considerable time’ even after the economy strengthened.” The news should mean a weaker U.S. dollar. Still other factors that are supportive for gold include the European Central Bank’s bond-buying program and limited gold sales by European central banks, Morgan Stanley adds.