Gold & Silver Digest: 2/7/13

Adam Taggart
By Adam Taggart on Thu, Feb 7, 2013 - 3:49pm

The Gold & Silver Digest contains headlines of stories that members of this group deem relevant and/or interesting to precious metals enthusiasts.

If you have articles to submit for the next digest, please email them to me by clicking here.

2/7/13 6:17 PM EST US close metals price quotes from Finviz

Reuters: Gold down in volatile trading on renewed euro fears

NEW YORK, Feb 7 (Reuters) - Gold fell in a volatile session on Thursday after comments by European Central Bank (ECB) President Mario Draghi ignited renewed economic fears over the euro zone.

The metal fell in tandem with U.S. equities and industrial commodities on recession worries after Draghi's comments triggered a nearly 1 percent drop in the euro against the dollar.

Draghi said that economic activity in the euro area should gradually recover later in 2013 but there are more negative risks than positive ones. 

Market Watch: Looking for a home run? Buy gold, sell yen

More than one year ago, I published my first column on named Dead Yen Walking . In that column, I advocated what I believed to be the best investment opportunity for the next few years, going long USDJPY (long the U.S. dollar vs. the Japanese yen), long CADJPY (long the Canadian dollar vs. the yen) and long XAUJPY (long gold vs. the yen).

The foundation for my recommendations was simple; the Japanese economy is a basket case. Japan's debt-to-GDP ratio is rapidly approaching 230% (by far the worst in the world), their trade surplus is morphing into a trade deficit, and their population is aging as well as shrinking. It is simply impossible for Japan to repay its debts.

Reuters: Turkey will not halt gold flow to Iran, demand may fall

Turkey will not be swayed by U.S. sanctions pressure to halt gold exports to Iran but Tehran's demand for the metal may fall this year, Economy Minister Zafer Caglayan said on Thursday.

U.S. officials are concerned that Turkey's gold sales, which allow Iran to export natural gas, provides a financial lifeline to Tehran, which is largely frozen out of the global banking system by Western sanctions imposed over its nuclear programme.

Forbes: Gold Traces Bullish Chart Pattern

These days there is much debate about the future direction of gold.  Fundamentals of gold are muddled.  On one hand central banks continue to print lots of money, but on the other, inflation seems to be under control.

Under such circumstances when the fundamentals are in flux, one can gain greater insight by turning to technical analysis for guidance.

Seeking Alpha:  DOW / Gold Ratio Still Low On Historical Basis

While the DOW flirts with 14,000, now just 1.2% below its all-time closing high of 14,164.53, the DOW:Gold ratio remains near 20-year lows.

As of the February 6, 2013 close of 8.33, the Dow-Gold Ratio is up 45.9% from its 21-year low of 5.71 set on August 22, 2011. The Dow-Gold Ratio is a measure of inflation and stock market sentiment. It shows how many ounces of gold it takes to buy the 30-stock Dow Jones Industrial Average.

Hindustan Times: China remains top gold producer for sixth year

China produced the most gold in world last year, making it the largest producer for the sixth straight year even as it remained the second largest consumer of the yellow metal after India. China's gold output increased 11. 66% from a year earlier to hit a record high of 403.05 tonnes in 2012, China Gold Association said.

The output was almost 100 times that of 1949, when the country produced just 4.07 tonnes, state run Xinhua news agency quoted the association as saying.

It attributed the increase to favourable government polices, which have put the industry on a fast track and made it a pillar industry in many of the country's gold producing areas.

The Golden Truth: The Next Big Move Higher In Gold

When you turn to the East and look at Japan, we are now almost at a record high gold price as measured in Japanese yen.  I think that tells you all you have to know about where the whole world is going in terms of the gold price.  The Japanese are being so overt about their intent to debase the yen that it’s being reflected in the gold price over there.That’s coming to America, Europe, and the rest of the world, where we see the same type of debasement going on... - John Embry, King World News

There's been a lot of media misdirection and appallingly invalid commentary about the relative strength of the economy and the outlook for the precious metals.  I've addressed the first issue in some previous posts, most notably my recent post on housing.

Silver Bear Cafe: The Stealth Hoodie: Another Reason to Like Silver

One of the compelling (and lately, reassuring) things about the silver investment thesis is that it works pretty much no matter what happens. If the financial system spins out of control capital will flow into precious metals as the last form of stable money. And if "normal" growth resumes, then tight silver supplies will run into growing industrial demand, sending the price way up.

Meanwhile, new uses for the metal keep popping up. It's a crucial part of silicon-based solar cells, for instance, so as solar panels cover the world's rooftops more and more silver is taken out of circulation. Investing in Silver, Moving out of the Dollar: The Roman Denarius, the American Dollar and the Return of Silver?

If the US dollar collapses, it will have a dramatic impact on the world economy because the dollar is the standard unit of currency for commodity markets, especially gold and oil. The U.S. dollar is still the world’s reserve currency, but the reality is that it can lead the world into an economic depression.

Nations with large external debts will not be able to trade sufficiently to earn the needed income to service their debts. They will slide into bankruptcy. However, countries such as Russia and China are taking necessary steps to avoid an economic tsunami caused by a collapse of the US dollar by announcing in 2010 that they will use their own currencies which is the Russian Ruble and the Chinese Yuan for bilateral trade.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.


Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 3248
CME announces margin cuts for gold & silver

Just announced:

CME Group Cuts Margin on Metals, Refined Products Futures

CME Group Inc. (CME) said it would cut the collateral requirements for trading in benchmark gold, gasoline, and other metals and energy futures contracts effective at the close of business on Tuesday.

Margins to trade benchmark Comex 100-troy ounce gold futures will be cut 10%, the exchange said in a notice emailed late Thursday. The margin to trade silver will decline 13%, copper 11% and platinum by 13%.

This should be bullish for gold & silver prices. Usually margins are hiked to slow specualtive run-up in commodities. (What defines speculative in the CME's eyes is another entire matter)

Lowering margins encourages new bids by (in theory) making it easier to take a long position in the underlying commodity. 

Rob P's picture
Rob P
Status: Bronze Member (Offline)
Joined: Oct 8 2008
Posts: 85
Not sure where this goes.

Here Adam, I don't know If I posted this in the right place previously.  This was in response to the interveiws of people on the street about the price of Gold.

A couple of thoughts about this:

I'm a retired professor.  One of the things I used to do in class (sociology), was to talk about money, paper money, as intrinsically worthless.  I used to point out that "it's just paper" and we collectively give it all the meaning it has.  We learn this through our socialization and we keep it all going "in the social matrix" of our daily lives.  Many of the people in the video really look like my typical students of days gone by.  They are very likely emersed in pop culture/consumerism and all that means.    Well, one idea that used to come up regularly in class  was the notion that "yes, but our money is backed by gold", which I'm sure everyone on this site knows is total nonsense; BUT, the fact that this idea regularly came from the students points to an enduring, underlying belief in Gold (and Silver too) as value. I think this underlying collective belief in gold will emerge when  we reach the crtical tipping point in regard to paper money. 

I'm not particualarly a Gold Bug in the sense that I think "if we just return to a Gold standard" everything will be fine.  Gold as currency brings a whole set of alternative problems and challenges.  What I do think is this:  As paper erodes, PMs (and land if your really lucky) are simply the default.  As my students  showed, this idea runs very very deep in the human psyche, or at least the culture. Gold may have no more intrinsic value than paper, save it's pretty and heavy, but the idea of its intrinsic valuable runs very very deep. 

This is one of the reasons I have a lot of faith in PMs over the long haul: "But, Dr. Bob our money's backed by Gold - right".  "No little Emily it's not backed by shit, it's paper". 

Pop culture seems to greatly reinforce this; after all, what do the Hollywood pirates want to get?  There are many examples.  Goldfinger (This one dates me), etc etc

I wonder if you did the same experiement in regard to the price of a barrel of West Texas Intermdiate (Brent is maybe a better choice), how many people would know the spot price within 25%.  Yet, their lives are actually maintained in every moment, in every way, on that one.

I think the interviewees would probably know the current price of gasoline at the pump.  That's viewing the world from inside the matrix, so they'd know that one.  But not all of the structures and prices that support it.

Also, just thinking; I wonder if you were to perform the same little street experiment on  middle class/emerging middle class people in say, India (with rupees or whatever), if you'd get different results.  I'd bet on that one too.


ScottT's picture
Status: Bronze Member (Offline)
Joined: Nov 2 2009
Posts: 48

Thanks for your analysis on this discussion topic, Rob P!  I posted the video more for its entertainment value than anything.  I am guessing the stunt was staged and edited for maximal humor before it was uploaded for our "consumption".  Of course one of the things I like so much about coming to this web site is the thoughtful discussion that ensues.  Many varied and oftentimes nuanced opinions.

rag54's picture
Status: Member (Offline)
Joined: May 1 2012
Posts: 5
Do we get free toasters when we buy Eagles???

Why is the face value of the American 1 oz. Gold Eagle Coin $50.00 and the Australian 1 oz. Gold Kangaroo Coin $100.00 when the difference in recognized currency exchange values are almost equal? Also, why is the preminum paid much greater on the Eagle coin? Just ask'n... 

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