Gold & Silver Digest: 2/4/13
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.
2/4/13 6:17 PM EST US close metals price quotes from Finviz
SAN FRANCISCO (MarketWatch) — Gold futures finished higher Monday, extending their gains to a second straight session, with the metal’s attractiveness as a safe-haven asset in the wake of a steep drop in U.S. equities offsetting pressure from strength in the dollar.
Political turmoil in Spain and expectations for a potential rise in demand from China were also among the factors providing support for gold.
The price of gold may have stalled in recent weeks with fears that loose monetary policy at the Federal Reserve could come to an end, but one analyst told CNBC that the precious metal is set for a good rally this year regardless of whether inflation occurs or not.
"Everyone is always bearish at the lows, that's the time to buy it, we're going to get a good rally this year I think," Harry Colvin director and senior economist at Longview Economics told CNBC Monday.
Never before have we seen major indicators in such a conflicting state. Taken in isolation many important indicators are giving clear signals, but they are in conflict with one another to the extent that the outlook is a clouded mess. When such situations arise it usually leads to choppy, treacherous market conditions until such time as the indicators align in a more unified manner.
There are lies, damned lies and statistics, which is why we generally use charts in preference to the latter, but as you will see as you read through this report, using charts is not always a piece of cake either, especially at a time like this. While you will soon understand what I mean when I say that the indicators are conflicting, that certainly does not mean that we can’t come to some useful conclusions about probabilities and how to handle these markets going forward.
Two highly successful libertarian iconoclasts – Peter Schiff and Doug Casey – in a wide-ranging, thought-provoking conversation covering precious metals, the status of Peter's father, Irwin Schiff, the near future of the US dollar, and much more.
As challenging as some of the ideas Peter and Doug expressed may be, they're just a sample of a principled libertarian way of thinking. Get a deeper perspective by reading Doug's new book, Totally Incorrect. It's sure to shake up your thoughts on several topics.
You may recall, last week we showed how the Fed’s balance sheet has already crested $3 trillion. Whither the balance sheet following this renewed commitment to “QE3″? And what’s it portend for the markets?
The noted economist Robert Murphy, in a Laissez Faire Club exclusive presentation we hosted last week, proffered this forecast:
Far be it for us to cast aspersions on the Fed’s motives, but we do have an opinion rooted in history. In a chapter on the Mississippi Bubble in 1715-1720 we wrote for Financial Reckoning Day, we observed the effort to set up a central bank with the intention of buying up the nation’s debt to keep the economy solvent… will end, umn, badly.
But “at least interest rates are low,” we quote our own Chris Mayer. And at least we can expect gold to remain the alternative currency of choice to the dollar, we add.
Renowned bond investor Bill Gross, the manager of PIMCO's Total Return Fund, the world's largest bond fund, just shared his top investment picks with Barron's. Leading the savvy investor's short and selective list was gold.
Why is a bond bull keen on investing in gold?
It's because Gross sees gold as a stellar inflationary hedge as global central banks attempt to reflate their economies.
If we are to believe market commentators, then Gold is being held back because the FED’s QE may be ending sooner than expected. The argument is that if the economy improves, the FED will back out of asset purchases (QE), and the gold bull market will end. But the FED has said it would continue to purchase assets to the tune of $85B per month, for as long as the unemployment rate remained above the 6.5% mark.
So the question becomes, when should would we realistically expect to see this level achieved. In order to bring unemployment down to that 6.5% level, the economy will need to add nearly 5 million jobs. That amount also includes providing jobs for the first time workers entering the force.
Two years ago, Marco Gigliello shut down his Mount Laurel jewelry store, Reflections of Venice, and opened a cash-for-gold shop along Route 70 in Cherry Hill.
Erlton Cash for Gold has jewelry, coins, and silverware on display, but "nobody buys anything," Gigliello said, standing behind the counter of his shop one afternoon last week.
He instead makes his money selling gold to refineries. It's a business that, in a sign of the times, has exploded in Cherry Hill. The township now counts 27 cash-for-gold shops, up from five just five years ago.
"Lenin was certainly right, there is no more positive, or subtler, no surer means of overturning the existing basis of society than to debauch the currency…The process engages all of the hidden forces of economic law on the side of destruction, and does it in a manner that not one man in a million is able to diagnose." — John Maynard Keynes
Neither Keynes nor Lenin would have envisioned currency debasement on a global basis yet that is exactly where we find ourselves today. As mentioned in last month's The Gold Owners Guide to 2013, it is as if John Law had been reincarnated simultaneously in every major nation state in the world. At this stage, it is difficult to gauge the potential effects though, as you are about to read, there is plenty of speculation. Though the price of gold remained range bound this past January, global demand for coins and bullion has been anything but restrained. The U.S. Mint reports the highest monthly sales ever for the Silver Eagle in January and the highest monthly total for the Gold Eagle in over two years. Similarly ETF gold holdings are up about 12% since last August reflecting strong interest among financial institutions and funds. Though Keynes was right about currency debasement, he missed the mark on the public's ability to identify the problem. Apparently, a good many understand the problem all too well.
Silver is finally looking ready for action.
And this is as much to do with what my mate and regular Money Morning editor, Kris Sayce, now calls ‘The Doc’s war against the China Bears’.
In case you missed it, I’ve kicked off the year by saying the China bears are about to get smoked.
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.