Tuesday, May 25, 2010

The Gold Rush Of 2010

They can't mine the stuff fast enough!

Here's some highlights from Bloomberg:

Speculators are buying gold faster than the world’s biggest producers can mine it as analysts forecast a 27 percent rally that may extend the longest run of annual gains since at least 1920.

Exchange-traded products backed by bullion added 41.7 metric tons in the week to May 14, the most in 14 months, data from UBS AG show. China, Australia and the 15 other largest mining nations averaged weekly output of 41.6 tons last year, researcher GFMS Ltd. estimates. Even though prices have fallen 4.6 percent to $1,191.65 from a record $1,249.40 an ounce May 14, the median in a Bloomberg survey of 23 traders, analysts and investors shows it will reach $1,500 by the end of the year.

Buying accelerated as the MSCI World Index of 23 developed nations’ stocks tumbled as much as 16 percent since mid-April and the euro weakened to a four-year low against the dollar. ...

“You could see gold go up another $1,000,” said Evan Smith, who helps manage $2 billion at U.S. Global Investors Inc. in San Antonio and in 2006 correctly predicted that gold would reach $700 within two years. “All of the turmoil and problems we’ve seen in Europe is just another reminder that there’s a lot of value in gold as a safe haven.”


While gold is favored by investors when the dollar weakens and inflation gains, the metal can also advance at other times. Gold rose 5.8 percent in 2008 as U.S. consumer prices gained 0.1 percent. The metal added 18 percent in 2005 when the U.S. Dollar Index, a measure against six counterparts, advanced 13 percent. Gold rose 8 percent this year as the U.S. Dollar Index jumped 11 percent. U.S. consumer prices dropped in April.

“People are afraid of the debasement of all the currencies,” said Peter Schiff, president and chief global strategist for Darien, Connecticut-based Euro Pacific Capital, whose clients have more than $2 billion in assets. “What’s surprising is that gold is still as low as it is,” he said, predicting $5,000 to $10,000 an ounce in the next five to 10 years.


Gold is still at half the peak set in 1980, after adjusting for inflation. Then, prices rose to $850, equal to $2,266 today, according to a calculator on the website of the Federal Reserve Bank of Minneapolis.

Supply from mines, which peaked in 2001, fell in five of the last eight years, data from London-based GFMS show. Companies are digging deeper to extract dwindling reserves, with mines in South Africa extending as far as 2.35 miles (3.8 kilometers) down.

Investment, including bars and coins, almost doubled to 1,901 tons last year, exceeding jewelry demand for the first time in three decades, according to GFMS. Jewelry will jump 19 percent to 2,100 tons this year and industrial use 8 percent to 398 tons, Sydney-based Macquarie Group Ltd. says.

Muenze Oesterreich AG, the Vienna-based mint that makes the Philharmonic, the best-selling gold coin in Europe and Japan, on May 12 said it had sold 243,500 ounces since April 26, more than the 205,300 ounces sold in the entire first quarter.

Central banks and governments are also buying gold, adding 425.4 tons last year, for a combined 30,116.9 tons, the most since 1964 and the first expansion since 1988, data from the World Gold Council show. Official reserves of central banks and governments may expand by another 192 to 289 tons this year, according to CPM Group, a research and asset-management company in New York.


“The second half of this year will likely show very anemic growth on a global basis,” he said. “The crisis in Greece is going to spread to Spain and it’s going to be very difficult to deal with. They are bailing out debt with more debt and it isn’t sustainable. It’s a wonderful scenario for gold.”


“People still want a store of wealth,” said Andrew Karsh, co-manager of funds for the Credit Suisse Total Commodity Return Strategy team. “A lot of the fundamentals are still in place.”

With the way the Fed is monetizing debt and printing money, you don't want to be holding Federal Reserve Notes when higher inflation hits.

Anyone can buy gold and silver coins very easily, and in small denominations/amounts too from various sellers like APMEX or Northwest Territorial Mint.

You can even move your IRA assets to a metals based portfolio.

Many people prefer outright physical ownership as opposed to trusting that someone is holding/storing it for you (which you pay fees for).

In any case, the Gold Rush is here, and people are moving to commodities to preserve their wealth so it doesn't get eroded away by inflation.

By a con­tin­u­ing process of infla­tion, gov­ern­ments can con­fis­cate, secretly and unob­served, an impor­tant part of the wealth of their cit­i­zens“ – John May­nard Keynes, 1919

By this means (fiat money and fractional reserve banking) government may secretly and unobserved, confiscate the wealth of the people, and not one man in a million will detect the theft.” - John Maynard Keynes

But the U.S. Gov­ern­ment has a tech­nol­ogy, called a print­ing press (or, today, its elec­tronic equiv­a­lent), that allows it to pro­duce as many U.S. dol­lars as it wishes at essen­tially no cost. By increas­ing the num­ber of U.S. dol­lars in cir­cu­la­tion, or even by cred­i­bly threat­en­ing to do so, the U.S. Gov­ern­ment can also reduce the value of a dol­lar in terms of goods and ser­vices, which is equiv­a­lent to rais­ing the prices in dol­lars of those goods and ser­vices. We con­clude that, under a paper-money sys­tem, a deter­mined gov­ern­ment can always gen­er­ate higher spend­ing and hence pos­i­tive infla­tion.“ – Cur­rent Fed­eral Reserve Chair­man Ben Bernanke, 2002

"If the people only understood the rank injustice of our Money and Banking system, there would be a revolution before morning." - Andrew Jackson