Gold & Silver Digest: 3/21/13
The Gold & Silver Digest contains headlines of stories that members of this group deem relevant and/or interesting to precious metals enthusiasts.
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3/21/13 6:30 PM EST US close metals price quotes from Finviz
Gold rose to a near one-month high on Thursday, as safe-haven buying emerged after the European Union gave Cyprus an ultimatum to raise billions of euros it needs to clinch a bailout deal or face a likely exit from the currency zone.
The metal has risen in five of six sessions on resurgent fears about euro zone debt fears, and on hopes that the U.S. Federal Reserve will maintain aggressive stimulus to battle still-high unemployment.
Silver also rose 1.5 percent, on track for its biggest one-day gain in almost two months.
Analysts at Societe Generale predict in a note Thursday that gold prices GCJ3 +0.40% will fall below $1,400 by the year’s end and continue heading south next year.
They cite two main reasons:
- Inflation has so far stayed low and now investors are beginning to see economic conditions that would justify an end to the Fed’s quantitative easing program.
- The dollar has started trending higher, which should make gold prices move lower as the physical gold market is extremely oversupplied without continued large-scale investor buying.
The analysts were much more upbeat when it comes to oil, saying they are constructive to bullish on the outlook for the year with a looser second quarter and a tighter more supportive second half to the year with regards to supplies. They see Brent UK:LCOK3 -1.40% trading between $102 – $122 a barrel and suggest buying the Dec. 2013 contract on expectations prices will go higher.
The tragedy in Cyprus continues. Reuters reports today that the island is in an impasse as the initial proposal of past weekend was killed by the Parliament with 100% of the votes. Several alternative plans are being discussed behind the scenes. One of the potential scenario’s is the Russians buying up one of the ailing Cypriot banks. Meantime it appears “EU officials voiced frustration but little sympathy for an ambitious but now bust banking system.” (via Reuters).
We wrote over the weekend our conclusion about the Cypriot case: Wakeup Call From Cyprus To The Rest Of The World. It was meant to help people SEE with their own eyes the truths and fundamentals behind the facts. Our article reached tens of thousands of readers.
The 10 biggest gold companies led by Barrick Gold Corp. (ABX) spent more than $100 billion in the past 20 years buying new mines and projects around the globe. Now they’re feeling pressure to throw the strategy into reverse.
Gold Fields Ltd. (GFI) spun off most of its South African assets in February. Billionaire hedge-fund investor John Paulson is calling for a breakup of Johannesburg-based AngloGold Ashanti Ltd. (ANG) Barrick, which has 27 mines, is selling assets after an acquisition and cost overruns helped erase $27 billion of the Canadian company’s market value.
Dr. Ron Paul was interviewed by Fox after the U.S. Federal Reserve confirmed it will continue its QE program highlights the importance of gold as money.
On July 13, 2011, when Dr. Paul was a U.S. Congressman he asked U.S. Fed Chairman, Ben Bernanke, "Do you think gold is money?" and Bernanke replied, "No, it’s a precious metal."
We all know the cliché: ‘Don’t mess with Texas.’
Well, a new piece of legislation is being proposed to send that message to Washington, when it comes to protecting Texas’ gold.
A lawmaker has proposed a bill to create a Texas Bullion Depository, which would allow the state and its citizens to store gold bullion in its own facility in Texas, with the protection of the state.
On March 4, 1933, Franklin D. Roosevelt became president for the first time, promising an “adequate but sound” currency. The next day, a Sunday, he closed the nation’s banks. “We are now off the gold standard,” he privately declared to a group of advisers. Goldbugs in the president’s circle immediately began prophesying doom. One of his aides, Lewis Douglas, proclaimed “the end of Western civilization.”
How Roosevelt took this fateful step has been the subject of debate among historians, many of whom believe that the president flailed his way through his first weeks in office, and only gradually came to the decision to take the country off gold that April. But the evidence suggests that Roosevelt intended to do so from Day One for very specific reasons, although he delayed letting the rest of the country in on his plans.
Eric Sprott may have surprised a new audience with some very pessimistic views on banks and the global economy, but spoke very positively on the investment merits of gold – and particularly of silver.
In introducing his talk to the audience at the first full day of Mines & Money Hong Kong (Conference and Exhibition) mega precious metals bull Eric Sprott opened by explaining why he titled his presentation Mania, manipulation and meltdown – although those who follow him will already be pretty well aware of his views, and his strong track record.
Despite its significant use in industry, silver behaved less like an industrial metal and more like a currency metal in the past weeks. The correlation between gold and silver on the basis of weekly price changes in the past 52 weeks was recently stable at more than 0.8. Silver thus followed the price movements of gold to a disproportionately great extent. Between end-January and end-February, silver dropped by 11% to a six-month low at USD 28 per troy ounce before recovering slightly since then (chart 6). Short-term oriented speculative financial investors largely withdrew from silver over that period – similar to gold. Within five weeks, net long positions were reduced by 79% to 6,300 contracts, the lowest level since late July (chart 7). Since a contract comprises 5,000 ounces, this means the equivalent of 3,700 tons of silver was sold via the futures market over that period. This roughly corresponds to one and a half times the monthly silver mine production, or a good 40% of investment demand of 2011. In the past we often saw marked countermovements after such pronounced developments.
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