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Sell off for Gold based on faulty logic

January 15th, 2014 No comments



Sell off for Gold based on faulty logic

Throughout 2013, and especially over the last few weeks of the year, investment markets have watched gold sell off. The reason for this fall in gold, logic has it, is that with the US economy growing more strongly and the Fed cutting back on its Quantitative Easing (QE) program the need to own gold is fading.

Money printing leads to inflation

The QE program is money printing, and this is inflationary. So what if the Fed has cut $10 billion from its QE program each month – that still leaves $75 billion being printed each and every single month. That’s a whole lot of inflation being stored up for the future.

It’s not only in America, either. Governments around the world are targeting higher inflation as a way to reduce their relative debt levels and swing their economies back to growth. In Japan this policy has been termed ‘Abenomics’ after the President who introduced it: and it’s working – Japan has rapidly rising inflation after years of deflation.

Everywhere you look, central banks are printing money in attempts to increase the money supply and grow the economy. This supply of currency is pushing asset prices to an all-time high. And when inflation is rising and interest rates are low, the one place you can’t put your money is in cash.

Targeting inflation will be good for gold

The Fed wants inflation to rise. That’s why, in conjunction with it lifting its foot off the QE pedal, it said it will introduce other monetary easing policies. It won’t be raising interest rates until inflation has reached 2.5%, for example. That’s not predicted to happen until 2016. So expect the Fed to be inflation accommodative for at least another 12 to 18 months.

I cannot remember a time when inflation was not good for gold.

Let’s not forget supply and demand

When the gold price falls, gold mining companies back away from production. Their current focus is on the most profitable mines and they have begun to cut back on expansion. Over the next few years that will mean the amount of gold available reduces significantly, at exactly the time the world’s central banks have begun stockpiling.

In fact 2012 and 2013 saw the largest purchases of gold by central banks on record. China looks to be exchanging paper assets for gold and silver.

Take advantage of short term weakness

This gold sell off holds no water when you examine gold logic. Enormous sums of money are being printed, central banks are hoarding gold, policy makers are targeting inflation, and gold supply is set to drop. Faulty logic has led to a weakness in gold. Short term price weakness always presents opportunity. When the fundamentals haven’t changed then it’s time to begin taking a leaf out of China’s book and start buying gold again.

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Is Gold a Safe Investment?

March 27th, 2013 No comments

For the past ten years, gold has been an excellent investment, rising from about $300 an ounce in 2000 to over $1,600 an ounce today. That’s probably why a recent US poll showed most investors believe gold to be the best long term investment, ranking it better than real estate, stocks and savings accounts. Many Australians agree.

One of the reasons for gold’s strength as an investment is the present global debt crisis. As economies slow down, there’s been an increasing pressure to service debt. Governments all over the world have responded by increasing the money supply. The potential of future inflation has driven investors to buy gold to protect the value of their money. This trend doesn’t seem likely to change, making gold prices very stable.

Another factor making gold a safe investment is the rising price of oil and the resulting inflation caused by greater global demand for oil and dwindling global oil production. As more economies around the world become increasingly dependent on oil as a primary energy source, more investors will turn to buying gold and other precious metals as a hedge against rising inflation and the devaluing of paper currency.

Gold vs. Paper Money and Investments

Sure, there will always be a difference of opinion between economists, each offering the pros and cons of their particular point of view. But, in the long run, gold has always done very well, seldom losing its value and never given away for free.

You can’t say the same for paper money. Too many times in history, paper money had no purchasing power and was better used as fuel for the furnace or for wiping a baby’s bottom.

The same can be said about many paper stocks and investments. Companies and industries flourish and disappear, making their investments of little to no value.

In 1970,General Motors, Exxon Mobil, Ford Motors, General Electric and IBM were the five largest global companies. Not today. Only Exxon Mobil is still in the top five. The US retail phenomenon, Wal-Mart, is # 3. In 1970, it was only a small local chain store.  

General Motors is # 19 today, behind Toyota (# 10) and Volkswagen (# 12). Ford Motors, General Electric and IBM are not even in the top 20.

As you can see, investing in stocks can only be profitable if you can predict the future and know who the winners and losers are going to be.

That’s never been the case for gold. Buying and selling gold is easy. Gold is always in demand and even more so today as mining production is becoming scarcer and even more costly, keeping gold prices stable or on the rise.

Most market analysts believe gold and other precious metals will continue to do well in the future, as long the global economy remains unstable. Some are predicting gold prices will go as high $2,000 an ounce in the short term.

Prospector strikes 5.5kg gold nugget in Ballarat, Victoria

January 18th, 2013 No comments


Image :

Excerpt : / Jessica

“A WHOPPING 5.5kg gold nugget worth up to $300,000 has been found in bush near Ballarat.

The “incredibly rare” nugget was found 60cm underground by a prospector, who wishes to remain anonymous, on Wednesday.

Ballarat Mining Exchange Gold Shop owner and dealer Cordell Kent said the prospector heard a faint noise on his detector and removed a dense pile of leaf mulch before he started digging.

“He thought he had detected the bonnet of a car when he saw a glint of gold,” Mr Kent said.

“He cleaned the top of it and the gold kept expanding and expanding … he saw more and more gold … he couldn’t believe what he was seeing.”

The nugget is worth about $282,000 in weight, but has an added premium because it is rare to find one over a kilogram, Mr Kent said.

“I have been a prospector and dealer for two decades, and cannot remember the last time a nugget over 100 ounces (2.8kg) has been found locally.

“It’s extremely significant as a mineral specimen. We are 162 years into a gold rush and Ballarat is still producing nuggets – it’s unheard of.”

Read more here :

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Fed ties rate pledge to a threshold as new stimulus set

December 13th, 2012 No comments

Ben Lincoln

Excerpt : / Pedro da Costa & Alister Bull

“(Reuters) – The Federal Reserve, announcing a new round of monetary stimulus, took the unprecedented step on Wednesday of indicating interest rates would remain near zero until unemployment falls to at least 6.5 percent.

It was the latest in a series of unorthodox measures taken by central banks around the world as major economies face erratic, sub-par recoveries from the global financial crisis and recession of 2007-2009.

The Fed said it expects to hold rates steady until its new threshold on unemployment was reached as long as inflation does not threaten to break above 2.5 percent and inflation expectations are contained.

The Fed’s actions initially gave a small lift to U.S. stocks prices, but the major stock indexes closed mostly unchanged, while government bond prices fell. Oil prices rose and the dollar weakened against the euro.”

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Termites Strike Gold

December 10th, 2012 No comments

Australian Termite Mound

CSIRO scientists have found that termites and ants are stockpiling gold in their mounds.

“Australia’s smallest and most numerous mining prospectors carry gold from deep underground up into their mounds and research has found they also accumulate metals in their bodies. Dr Aaron Stewart explains how they can help us find new mineral resources.”

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Money Minute – investing in gold

December 10th, 2012 1 comment

With the declining value of the US dollar, gold prices are continuing to soar. Today’s Finance Editor Ross Greenwood explains why investing in gold could be a smart decision for your future.

View video here –

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RBA cuts rates to 3pc emergency low

December 4th, 2012 No comments


“The Reserve Bank of Australia has cut its official interest rate to 3 per cent, matching the record low of the global financial crisis, to spur an economy squeezed by falling commodity prices, the high dollar, moribund sentiment and government cutbacks.

Board members elected to lower the overnight cash rate by 0.25 of a percentage point from 3.25 per cent, as forecast by most economists.

Opposition treasury spokesman Joe Hockey said the Reserve Bank was clearly worried about non-mining investment, as well as business and consumer confidence.”

“The Reserve Bank wouldn’t be cutting interest rates if the economy, looking forward … was doing really well,” he said in Sydney. “These are emergency levels of interest rates and the Reserve Bank is catching a falling Australian economy where a government is not.”

Mr Hockey added that people with savings accounts and retires would not welcome Tuesday’s decision.”

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Investing in silver: A smart move in the current global economic scenario

December 4th, 2012 No comments

Excerpt : / Hassan Ahmed

“Many articles on silver that you will come across will talk about demand and supply of the metal without addressing the underlying fundamentals that drive it. The hybrid nature of silver as a half-precious and half-industrial metal makes its story slightly more complicated than other commodities.

Considering this dual nature of silver, and to understand what influences the price of this commodity, it is important to examine the factors that dictate the demand of industrial raw materials and the prices of precious metals. Since recent data paints a bullish picture for both, the smart investor should consider an investment in silver.”

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Gold price hits another new high of Rs 32,975/10 gms

November 28th, 2012 No comments

East India Gold CoinEast India Gold CoinEast India Gold Coin

Excerpt – Source :

“New Delhi: Gold prices Tuesday surpassed all previous highs to set new record of Rs 32,975 per 10 grams on demand from retailers for the peak marriage season.Traders said gold prices improved on increased demand in view of the ongoing marriage season and lifted the prices to another record high.
A firming global trend further supported the prices, they said.”

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The Bubble: Interviewing Peter Schiff

November 26th, 2012 No comments

Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.