Where Is Gold Going In This Market

[churchill]

Lots of nice charts - http://www.gold-eagle.com/editorials_08/bevan053009.html

[badge]

[...]prudent €-investors made a killing by investing in subordinated bonds of €-financial institutions when the first green shoots could be seen in march. i am not talking 30% but 100% and more across the board, within 2½ months!

so did financial equity players, with greater liquidity and lower costs Im not even entertaining talk of liquidation creditors

i don't deny that Badge but "bondsmen" like me consider buying, trading, holding equities (in any market) as hazardous gambling

You should tell that to GM bond holders

Meet the triple A asset backed index from Markit. Admittedly its in mortgage backed securities, but I'd draw your attention to the current price, indicating a 73% loss on maturity. Similar to many real estate REITs, equities etc etc

Bon chance

[Abrak]

i don't deny that Badge but "bondsmen" like me consider buying, trading, holding equities (in any market) as hazardous gambling

And as an equities man I can say I have never understood the theoretical 'limited upside unlimited downside' concept of bonds. Now admittedly my view is rather tainted by my experience of Thailand where loans of any sort are generally treated as a permanent gift of wealth (especially if they happen to be given unsecured in a foreign currency by foreigners with strange accents like ECDs.) I also could not fathom why a Thai financial institution would issue an unsecured debenture to my company (well not mine but I was the largest shareholder) at a coupon of 2.76% (this was 3 or 4 years back).

To some extent I dont believe you even need to gamble much in equity markets - to the extent even today you can still find US$1bn stocks trading below BV, on a PE of 6x and with a yield of 7%.

What I find is a particular 'gamble' in the bond market is the 'moral hazard' element. For instance, with financial institutions subordinated debt holders should logically bear losses before the tax payer that usually only protects depositors but in many/most/all cases it seems that subord debt holders are being repaid in full. Now this result might have been predictable, say if the loan deposit ratio of the banking system was so high that not protecting sub debt would prove a major burden, I simply dont know. Nor do I have any idea whether investing in say GM's sub debt is analyzable or simply a 'gamble'.

[flying]

This one is echoing what you have said Mr. Naam

http://www.moneyweek.com/investments/preci...-one-14788.aspx

This rally in gold since mid-April has largely been a result of dollar weakness, not increased buying. If you look at the price of gold measured in other currencies - picking the pound and the euro at random, as shown below - you can see it has barely rallied against them at all. If this move were anything more than fluctuating currencies, you would see gold rising against all currencies on higher volume. So don't get too excited just yet.

But at the end of the day..........

If the USD drops another 10-20% do you think other currency holders will join in?

Note: I have no idea about the author of this article as I have never heard of him before.

[Naam]

i don't deny that Badge but "bondsmen" like me consider buying, trading, holding equities (in any market) as hazardous gambling

And as an equities man I can say I have never understood the theoretical 'limited upside unlimited downside' concept of bonds.

it's a matter of perception to look at 500% and more and call it "limited upside" true, the 500% belong to the past but this year's 100-200% in subs are a reality. and those who have the guts betting on a full global recovery will rake in several hundred percent assuming the recovery will indeed take place and assuming they were lucky enough to select an optimal entry point (march 2009).

disclaimer: i don't possess (anymore) the afore-mentioned guts and cash(ed) in profits whenever i think "that's a satisfactory result".

[Naam]

To some extent I dont believe you even need to gamble much in equity markets - to the extent even today you can still find US$1bn stocks trading below BV, on a PE of 6x and with a yield of 7%.

dividend yields are nothing but polaroid photos of the meals served last time. nobody knows what the cook will put on the table next time. bondholders know what they will be served. if a company goes bankrupt shareholders are wiped out, bondholders can still expect a certain recovery value and/or a restructuring. exceptions like Enron et al just prove the rule.

shareholders / bondholders = never the twain shall arrive at a common denominator

[Naam]

1. This one is echoing what you have said Mr. Naam

2. If the USD drops another 10-20% do you think other currency holders will join in?

1. besides the Elliott tsunamis and the reversed head-shoulder-tits-butt mumbo jumbo he states mostly facts (as i did).

2. i don't understand your question Flying

[Abrak]

The bounce in equities has been quite strong and has that feel that it will probably be sustained. It was clearly based partly on two reasons:

1) A bounce from a very oversold position

2) Signs of possible 'green shoots' (whether they exist or not being an exceedingly boring subject.)

Normally with signs of economic recovery you would expect the gold price to go down as equities rise, but it has actually risen. The 10 year UST has gone from 2.5% to 3.5%.

Now I read this as meaning that the rise in equities is due partly to a 3rd reason and that is a reassessment of inflation resulting in people seeing increased risk in holding cash and a dash from cash into hard assets.

On the other hand my thinking might just be wrong. The rise in gold may be just an illusion created by the fall in US$ and the 3rd factor (if there is one) might be that equities looked cheap against USTs - hence the switch.

Which thinking is basically right (if either)?

[flying]

The bounce in equities has been quite strong and has that feel that it will probably be sustained. It was clearly based partly on two reasons:

1) A bounce from a very oversold position

2) Signs of possible 'green shoots' (whether they exist or not being an exceedingly boring subject.)

Normally with signs of economic recovery you would expect the gold price to go down as equities rise, but it has actually risen. The 10 year UST has gone from 2.5% to 3.5%.

Now I read this as meaning that the rise in equities is due partly to a 3rd reason and that is a reassessment of inflation resulting in people seeing increased risk in holding cash and a dash from cash into hard assets.

On the other hand my thinking might just be wrong. The rise in gold may be just an illusion created by the fall in US$ and the 3rd factor (if there is one) might be that equities looked cheap against USTs - hence the switch.

Which thinking is basically right (if either)?

While I do not think the subject of green shoots being real or not is boring

I find myself thinking the same as your 3rd reason quite a bit.

That was actually my 2nd Q above to Naam. What I meant was once folks realized that.... did he think more currency would switch from stocks to metals or other currencies.

What I am thinking is the money is running from what was perceived as a safe haven...the USD

Some is going to gold & silver...Obviously

But also a lot is running to stocks in the hopes of having *something*

Which brings us back to those green shoots. Their existence is not boring to me for that reason. I believe they do not exist & when the crowd finds that out what will be the next move?

Edited June 1, 2009 by flying

[churchill]

I think a falling $ is seen as a good thing for the US ecomomy in the short term hence rising equities . Gold is rising as people are looking further ahead at possible inflation and for increasing problems with the US borrowing needs .

Rising gold and equities a good time to be in gold mining shares .

Gold at the $1,000 door - http://www.mineweb.co.za/mineweb/view/mine...2&sn=Detail

Gold, and gold stocks, fever - http://www.mineweb.co.za/mineweb/view/mine...5&sn=Detail

[Abrak]

Gold, and gold stocks, fever - http://www.mineweb.co.za/mineweb/view/mine...5&sn=Detail

You know, Churchill, I am basically an equities guy and I have looked at gold mining stocks several times although not in the last 6 months on the basis that a) they are supposed to be a geared play on gold (something like 4x) and they keep underperforming the physical price. Take Newmont (New) I think it is off something like 40% from its highs of 2 years ago.

The problem I find is that there really isnt much value in them even at current prices. Now I may have been looking at the wrong stocks say US majors instead of aussie minors but it seems that gold shares havent really been performing as they should have been.

[churchill]

Gold stocks are just about catching up with last years prices when Gold was at it's previous highs / I think they still have a lot of catching up to do IF gold can establish itself over 1000 - I think Gold Stocks could double plus from here - so I think from this level one can gain a lot more by investing in gold stocks as opposed to physical gold .

[Abrak]

Which brings us back to those green shoots. Their existence is not boring to me for that reason. I believe they do not exist & when the crowd finds that out what will be the next move?

Ok so now I will bore you with 'green shoot' theory.

1) All that is needed for evidence of GS is that news stops getting worse than expected. This has to happen at some point. After all 50% of the time news will by definition be either worse or better than expected.

2) GS will appear in the numbers at some point presumably before the end of the year even without ANY fundamental recovery in the economy. This is because there will be an end to the destocking cycle and so production will bounce.

Therefore despite the fact that GS is probably an entirely imaginary phenomenon it does have some sound thinking behind it and will probably exist for some time. At that point hopefully with the economy awash with cash and nowhere to put it, gold becomes the asset of last resort!!

[churchill]

Part of the solution but it will never happen because if it does the US will have to accept a reccession ?

Global Crisis ‘Inevitable’ Unless U.S. Starts Saving, Yu Says

Share | Email | Print | A A A

By Bloomberg News

June 1 (Bloomberg) -- Another global financial crisis triggered by a loss of confidence in the dollar may be inevitable unless the U.S. saves more, said Yu Yongding, a former Chinese central bank adviser.

It’s “very natural” for the world to be concerned about the U.S. government’s spending and planned record fiscal deficit, Yu said in e-mailed comments yesterday relating to a visit to Beijing by U.S. Treasury Secretary Timothy Geithner.

The Obama administration aims to reduce the fiscal deficit to “roughly” 3 percent of gross domestic product from a projected 12.9 percent this year, Geithner reaffirmed today. The treasury secretary added that China’s investments in U.S. financial assets are very safe, and that the Obama administration is committed to a strong dollar.

It may be helpful if “Geithner can show us some arithmetic,” said Yu. “We need to know how the U.S. government can achieve this objective.”

The deficit is projected to reach $1.75 trillion in the year ending Sept. 30 from last year’s $455 billion shortfall, according to the Congressional Budget Office.

The U.S. needs a higher savings rate and a smaller deficit on the current account, which is the broadest measure of trade, or “another financial crisis triggered by a dollar crisis could be inevitable,” the Chinese academic said.

The U.S. current account deficit fell to $673.3 billion or 4.74 percent of GDP last year from $731.2 billion, or 4.91 percent of GDP, the year earlier.

Global Currency

China is the biggest foreign holder of U.S. Treasuries with $768 billion as of March. Premier Wen Jiabao called in March for the U.S. “to guarantee the safety of China’s assets.” Central bank Governor Zhou Xiaochuan has proposed a new global currency to reduce reliance on the dollar.

Yu said U.S. tax revenue is not likely to increase in the short term because of low economic growth, inflexible expenditures and the cost of “fighting two wars.”

China wants to know how the U.S. will withdraw excess liquidity from its financial system “in a timely fashion so as to avoid inflation” when its economy recovers, said Yu, now a senior researcher at the government-backed Chinese Academy of Social Sciences.

He questioned whether there would be enough demand to meet U.S. debt issuance this year.

Referring to the Federal Reserve “as the world’s biggest junk investor,” and to Chairman Ben S. Bernanke as “helicopter Ben,” Yu said the Fed has dropped “tons of money from the sky since the subprime crisis.”

“The balance sheet of the Federal Reserve not only has expanded like mad but is also ridden with ‘rubbish’ assets,” he said.

http://www.bloomberg.com/apps/news?pid=206...id=aCV0pFcAFyZw

[lannarebirth]

Which brings us back to those green shoots. Their existence is not boring to me for that reason. I believe they do not exist & when the crowd finds that out what will be the next move?

Ok so now I will bore you with 'green shoot' theory.

1) All that is needed for evidence of GS is that news stops getting worse than expected. This has to happen at some point. After all 50% of the time news will by definition be either worse or better than expected.

2) GS will appear in the numbers at some point presumably before the end of the year even without ANY fundamental recovery in the economy. This is because there will be an end to the destocking cycle and so production will bounce.

Therefore despite the fact that GS is probably an entirely imaginary phenomenon it does have some sound thinking behind it and will probably exist for some time. At that point hopefully with the economy awash with cash and nowhere to put it, gold becomes the asset of last resort!!

It's even simpler than that. Most "green shoots" are related to consumer confidence and "Leading Economic Indicators". Those both have inputs that feedback to the stock market climbing. There doesn't need to be any kind of fundamental improvement to see "green shoots", you just need to see markets getting bought.

[Naam]

To some extent I dont believe you even need to gamble much in equity markets - to the extent even today you can still find US$1bn stocks trading below BV, on a PE of 6x and with a yield of 7%.

dividend yields are nothing but polaroid photos of the meals served last time. nobody knows what the cook will put on the table next time. bondholders know what they will be served. if a company goes bankrupt shareholders are wiped out, bondholders can still expect a certain recovery value and/or a restructuring. exceptions like Enron et al just prove the rule.

shareholders / bondholders = never the twain shall arrive at a common denominator

i forgot to mention something which investors like me consider very important, namely the fact that in nearly all cases those who invested in stocks have to share their dividends with the local taxman. the U.S. of A. charges a withholding tax of 15% plus an additional 15% "backup withholding tax" if the investor's tax residence is not in a country which signed a double tax agreement with the U.S.

but even if the latter applies, the first 15% are gone with the wind if the investor has no possibility to deduct them from his domestic tax liability (as is the case of retiree living in Thailand who does not pay income tax). other countries, like Switzerland deduct 35%, U.K. and Germany 25% and Italy 15%.

[lannarebirth]

To some extent I dont believe you even need to gamble much in equity markets - to the extent even today you can still find US$1bn stocks trading below BV, on a PE of 6x and with a yield of 7%.

dividend yields are nothing but polaroid photos of the meals served last time. nobody knows what the cook will put on the table next time. bondholders know what they will be served. if a company goes bankrupt shareholders are wiped out, bondholders can still expect a certain recovery value and/or a restructuring. exceptions like Enron et al just prove the rule.

shareholders / bondholders = never the twain shall arrive at a common denominator

i forgot to mention something which investors like me consider very important, namely the fact that in nearly all cases those who invested in stocks have to share their dividends with the local taxman. the U.S. of A. charges a withholding tax of 15% plus an additional 15% "backup withholding tax" if the investor's tax residence is not in a country which signed a double tax agreement with the U.S.

but even if the latter applies, the first 15% are gone with the wind if the investor has no possibility to deduct them from his domestic tax liability (as is the case of retiree living in Thailand who does not pay income tax). other countries, like Switzerland deduct 35%, U.K. and Germany 25% and Italy 15%.

If it's in a cash account yes, if in an IRA, no.

[lannarebirth]

Gold stocks are just about catching up with last years prices when Gold was at it's previous highs / I think they still have a lot of catching up to do IF gold can establish itself over 1000 - I think Gold Stocks could double plus from here - so I think from this level one can gain a lot more by investing in gold stocks as opposed to physical gold .

You may well be right, but I bought $XAU puts instead. If I'm wrong Gold will probably see 1200 PDQ.

[badge]

There doesn't need to be any kind of fundamental improvement to see "green shoots", you just need to see markets getting bought.

Agreed

[flying]

Ok so now I will bore you with 'green shoot' theory.

1) All that is needed for evidence of GS is that news stops getting worse than expected. This has to happen at some point. After all 50% of the time news will by definition be either worse or better than expected.

2) GS will appear in the numbers at some point presumably before the end of the year even without ANY fundamental recovery in the economy. This is because there will be an end to the destocking cycle and so production will bounce.

Therefore despite the fact that GS is probably an entirely imaginary phenomenon it does have some sound thinking behind it and will probably exist for some time. At that point hopefully with the economy awash with cash and nowhere to put it, gold becomes the asset of last resort!!

I see.........In that case perhaps green shoots is a bad choice of words on their part

Green shoots supposes growth wouldn't you think? In fact it might even be called new growth by many.

Yet I see only signs of weakening in my neck of the woods.

This explanation of all there needs for green shoots is for the news to stop getting worse is another grasping at straws IMHO

It is like PS said........They are saying we need to increase demand????? Demand never left...everyone wants that is not the problem.

Show us increased production ! That is what I would call a green shoot

Increased production would be a increase in labor = not only a lessening of unemployment but a stop to its high speed increase in numbers & a increase in jobs/*employment*

In fact what you call production bounce in your #2......Now that is something I would like to see & called a green shoot.

Naturally as a Contractor I sure hope to see something like you describe by the time you describe ( before the end of 09 ) But I must be honest I do not see it in the slightest (here)

The slide has not only not stopped it has increased. That is not to say there is not money to be made on this condition. As many have pointed out.

Edited June 1, 2009 by flying

[Abrak]

Ok listen I am not really a believer in 'green shoots'. I simply believe this - some numbers are just so horrifibly bad they simply must go up at some point!!

This does not mean I subscribe to the CBO theory that the US will grow at over 3.5% per annum over the next 5 years - I think they will be lucky to see 1% real growth average.

But take a statistic like US cars sales - they are running at the lowest per capita sales rates since world war 2 - that is simply ridiculous (on the basis that I assume almost nobody had a car before WW2). If you take the annualised rate of 9 million sales it would take 28 years to replace the current car population in the US. And that is just the current registered numbers which have risen in every year except one in the past 50. So unless you are expecting financial Armageddon it is natural to assume that next year's sales will be up on this year's sales. This will be widely recognized as a green shoot when all it is, is a statement of the bleeding obvious.

[Naam]

To some extent I dont believe you even need to gamble much in equity markets - to the extent even today you can still find US$1bn stocks trading below BV, on a PE of 6x and with a yield of 7%.

dividend yields are nothing but polaroid photos of the meals served last time. nobody knows what the cook will put on the table next time. bondholders know what they will be served. if a company goes bankrupt shareholders are wiped out, bondholders can still expect a certain recovery value and/or a restructuring. exceptions like Enron et al just prove the rule.

shareholders / bondholders = never the twain shall arrive at a common denominator

i forgot to mention something which investors like me consider very important, namely the fact that in nearly all cases those who invested in stocks have to share their dividends with the local taxman. the U.S. of A. charges a withholding tax of 15% plus an additional 15% "backup withholding tax" if the investor's tax residence is not in a country which signed a double tax agreement with the U.S.

but even if the latter applies, the first 15% are gone with the wind if the investor has no possibility to deduct them from his domestic tax liability (as is the case of retiree living in Thailand who does not pay income tax). other countries, like Switzerland deduct 35%, U.K. and Germany 25% and Italy 15%.

If it's in a cash account yes, if in an IRA, no.

LRB, i claim that not only german Klingons but all non-U.S. investors in this galaxy abhor obsceneties such as IRAs

[jcon]

Gold stocks are just about catching up with last years prices when Gold was at it's previous highs / I think they still have a lot of catching up to do IF gold can establish itself over 1000 - I think Gold Stocks could double plus from here - so I think from this level one can gain a lot more by investing in gold stocks as opposed to physical gold .

You may well be right, but I bought $XAU puts instead. If I'm wrong Gold will probably see 1200 PDQ.

lanna,

you bought $XAU puts again? I remember you bought them way up (down) there when the AUD what almost trading par (?!?!) with the USD, and IIRC u should have made some nice money on that trade I hope this one goes your way too.

[Naam]

news and opinions

Gold Longs At High of Year

Net speculative long positions in Comex gold increased by 1.6moz to

22.2moz in the week to Tuesday 26 May, according to data released by the

Commodity Futures Trading Commission (CFTC) on Friday. This move was

driven by a mixture of new longs entering the market (+2.7moz to

28.54moz) and 1.16 Moz of new shorts (up from 5.2moz to 6.3moz). Gold

moved $27/oz over the week to $952/oz but had made further ground since

then, up to $980/oz in Friday's trade. Total Comex open interest did not

increase in Wednesday and Thursday's sessions but we suspect that net

longs have increased along with price since then. Although gold has

gained a lot of attention over the past two weeks, it is worth noting

that speculators on Comex are now very long and with no sign of strong

inflows into the ETFs the dollar must weaken further for gold to make

more ground. We hold our one month forecast at $950/oz (indicating we

think gold is vulnerable to any near term reversal in US dollar

direction) but keep our 3m forecast of $1000/oz indicating that we see

gold making further ground, although not immediately.

Gold much higher on Friday

After trading around $940-960/oz for most of the first four days of the

week, gold traded rapidly higher on Friday, moving from a low of about

$960 to close just short of the day's high of $980/oz as dollar weakness

prompted investors and speculators to buy gold on the OTC and Comex

markets. Gold made further gains in Asian trade on Monday and as the

dollar has started the week under pressure in London, further near-term

gains in gold cannot be ruled out. But as we point out below, there has

been no sign of investors adding to ETF holdings on this slightly lagged

data. Also positioning on the Comex market is getting extended: Net

longs as of Tuesday 26 May were the highest in 2009 and the largest

since July 2008 and have probably increased further since then. For gold

to make further gains, the recent dollar weakness needs to continue.

SPDR Gold ETF remains stalled

On May 29, the total holdings of the nine major gold ETFs that we track

increased to 53.22 Moz from 53.18 Moz (revised) previously. Notably,

ETFS (London) ETF expanded its holdings by 28 Koz to 2.76 Moz, while

other ETFs holdings were stable over the day. The rolling monthly

increase was unchanged at 0.86 Moz over the previous day. Last week saw

marginal ETF flows as holding went up by only 0.14 Moz, compared to 0.52

Moz over the week to May 22."

Black Swan Fund Makes a Big Bet on Inflation

A hedge fund firm that reaped huge rewards betting against the market

last year is about to open a fund premised on another wager: that the

massive stimulus efforts of global governments will lead to

hyperinflation. The firm, Universa Investments L.P., is known for its

ties to gloomy investor Nassim Nicholas Taleb, author of the 2007

bestseller "The Black Swan," which describes the impact of extreme

events on the world and financial markets. Funds run by Universa, which

is managed and owned by Mr. Taleb's long-time collaborator Mark

Spitznagel, last year gained more than 100% thanks to its bearish bets.

Universa now runs about $6 billion, up from the $300 million it began

with in January 2007. Earlier this year, Mr. Spitznagel closed several

funds to new investors. Unlike last year's sudden market implosion,

inflation isn't an unimaginable event that few currently anticipate. In

fact, many fear inflation right now amid government efforts to goose the

economy. Universa's bet, however, is that inflation will reach levels

few expect. By opening the inflation fund, Universa is trying to

capitalize on a wave of investor demand for its products, which when

they're right can protect investors from extreme market moves. The new

strategy, designed by Mr. Spitznagel, aims to post big gains if

inflation and interest rates take off as they did in the 1970s. Universa

will invest in options tied to commodities such as corn, crude oil and

copper, as well as options on stocks such as oil drillers and gold

miners. (WSJ)

So another high-profile investor warns about hyperinflation and mentions

gold and other commodities. Yet many mainstream economists see no pick

up in developed world inflation in the near term or in the next few

years. This suggests that positioning for a big up-tick in inflation is

a minority trade at present and if inflation does pick up, gold and

other commodities could find a lot more buying interest.

Claymore buys 345,000 oz of gold with fund launch

Canada's Claymore Investments Inc on Friday said it has bought 345,000

ounces of gold bullion at an average price of $959.05 per ounce in

conjunction with the launch of its gold bullion fund. The privately held

company, which operates 23 exchange-traded funds (ETFs), said that

Claymore Gold Bullion Trust began trading on the Toronto Stock Exchange

on Thursday. The trust will automatically convert into an ETF if the

fund units trade at a discount to net asset value six months after the

closing of its offering, Claymore said. ETFs back each security issued

with physical stocks of a given commodity. They are listed on stock

exchanges and offer investors exposure in the underlying commodity

without taking delivery. Gold rose nearly 2 percent on Friday to $976 an

ounce, boosted by a falling dollar. (Reuters)

Mexico's Silver Output Fell 54.7% Because of Strike

Mexico's March silver output dropped 54.7 percent from a year earlier to

99,214 kilograms because of "labour circumstances," the National

Statistics Agency said. Copper production fell 27.6 percent from a year

to 20,371 metric tons, and gold output declined 63.6 percent to 1,635

kilograms, the agency said today in an e-mailed statement. Industrias

Penoles SAB, the world's largest producer of silver, declared force

majeure at its Met-Mex refinery in northern Mexico in March because it

was unable to refine minerals or supply customers during a strike. The

strike ended April 14. (Bloomberg)

Australian gold output seen up in 2009 - Surbiton

Australia's annual gold production is set to rise for the first time in

12 years in 2009 as new mines start up and existing operations expand in

response to the precious metal's price soaring towards $1,000 an ounce.

The country's output of the precious metal rose 3 percent in the first

quarter this year from the same quarter a year earlier to 54.5 tonnes or

1.75 million ounces, gold industry consultancy firm Surbiton Associates

said in a report released Sunday. Although first quarter output was

little changed from the December quarter, Surbiton said production

should rise through the remainder of the year, barring any unforeseen

mine closures. It did not give a forecast production figure for 2009 but

said it should exceed the 219 tonnes produced in 2008. On Friday, the

gold price rose to a three-month high, trading around $966 an ounce, as

the dollar weakened against the euro amid fears over rising U.S.

government debt. Surbiton director Sandra Close said firming gold prices

might encourage more exploration for gold in Australia, setting the

scene for further production expansion. In recent years China's rising

gold output has knocked Australia out of the world's top-three gold

producers. Last year Australia was fourth, behind China with 282 tonnes,

the United States with 229 tonnes and South Africa with 220 tonnes. In

Australia, first quarter output was boosted by OZ Minerals Ltd's

start-up of its Prominent Hill gold-copper project in South Australia.

Apex Minerals Ltd reopened the Wiluna mine in Western Australia and ATW

Gold Corp started production at its Burnakura mine, also in Western

Australia. Close said the biggest boost to output would come with the

mid-year commissioning of Newmont Mining Corp's low-grade Boddington

project in Western Australia. Being developed at a cost to $2.6-$2.9

billion, Boddington is expected to produce about 1 million ounces per

year for the first five years of operation. In the first quarter,

Surbiton said Newcrest Mining Ltd's Telfer mine was the country's top

producer, producing 162,035 ounces. Second-placed was the Superpit mine

on the outskirts of the outback mining town of Kalgoorlie. Jointly owned

by Newmont and Barrick Gold Corp, it produced 158,000 ounces. (Reuters)

India Gold Trade Launches Body to Fix Local Prices, Contracts

Indian gold dealers and retailers have formed the Indian Bullion Market

Association (IBMA), which will provide a uniform price twice daily for

gold sold in the local market. The new association was launched by the

National Spot Exchange Ltd., an arm of India's leading commodity futures

bourse, the Multi Commodity Exchange. The Indian gold retail market is

fragmented, and until now there has been no uniform local price

available for spot gold. The association will also approve local

refineries' gold output and certify whether the metal produced can be

traded on the National Spot Exchange, Anjani Sinha, managing director

and chief executive of the spot exchange said at the launch of IBMA over

the weekend. Most of India's annual gold consumption of 700 tons to 800

tons is imported, so the local gold price is pegged to international

prices and to the value of the rupee against the dollar. "IBMA will

identify the inefficiencies involved in the Indian bullion market and

work to create a momentum to remove such inefficiencies," Sinha said.

IBMA has more than 20 regional bullion trade associations as members,

each having over 200 members themselves. National Spot Exchange Ltd.,

promoted by the Financial Technologies India Ltd, will hold 51% of IBMA,

while bullion traders will hold the remaining stake. (Dow Jones)

Ghana Q1 gold output up 9 percent

Ghana's gold output in the first quarter of 2009 was 675,151 ounces, up

9 percent on the first three months of last year, while higher world

prices pushed cumulative mining revenue up 11 percent to $641.2 million,

Chamber of Mines data showed on Saturday. Ghana, the world's no.2 cocoa

producer, is also Africa's second biggest gold miner after South Africa.

It produced 2.6 million ounces of the precious metal in 2008, when total

mining revenues were $2.2 billion. "There are prospects for increased

output in the gold sub-sector this year," said Jurgen Eijgendaal,

president of the chamber. "The resources are available -- the mines are

putting in more and we expect production to go up." Bauxite shipments

also went up 41 percent, earning the country 49 percent more in revenue,

but manganese output fell 30 percent. Gold accounted for 96 percent of

Ghana's minerals revenue last year. Many investors see gold as a safe

store of value, and it has performed strongly during the global

financial downturn. Gold futures rose above $980 per ounce on Friday to

end the day's business close to a three-month high. (Reuters)

Chinese Banks See Gold in Global Markets

Next week, China Construction Bank will be the third Chinese bank to

open a full branch in London. As the story goes, CCB is trying to ramp

up its global presence and "tailor-make" financial products to suit its

needs. This includes trading in crude, metals, interest rates, and

foreign exchange. China Merchants will soon open up a London branch, as

well, and China Ag Bank will open a London and NY branch later this

year. One take away from this announcement is that new punters with deep

pockets are coming to town. The LME is welcoming its new neighbours by

pushing gold to new highs. Oil contracts are following suit in the pits.

Given that these banks are sufficiently capable at trading currencies

and making "tailored" products, according to the FSA and Chinese

authorities, its is surprising to still hear from China that the Chinese

market is sufficiently undeveloped that the government must manage the

exchange rate. Maybe Mr Geithner can ask about that on his visit. China

London excursion, also, has implications for the USD. Once the Chinese

banking environment becomes more familiar with such outlier currencies

as the EUR and "Swissy," it may feel less compelled to price everything

in USD terms. Chinese internationalization will wean the country off of

its USD dependency. Finally, it is interesting to see which markets CCB

and other Chinese banks are targeting; namely, commodities. Last week,

it was announced that iron ore contracts will trade in Shanghai

suggesting industrial metal traders will be batting first. If Chinese

citizens had a say, then gold would be first on the list. The China

Daily featured a nice story today titled "gold fever grips Chinese

investors." Jewelry demand alone makes China the second largest consumer

in the world. In the article, it says that gold demand rose 38% last

year. The largest increase appears to be by investors in Europe. If

nouveau riche Chinese (as measured by the Shanghai index) demand more

"bling" and Europeans replace the EUR under the mattress with gold bars

(because ECB cuts rates), then a move up in gold is inevitable. The hope

for gold bears is that London financial experts will introduce their

Chinese counterparts to highly lucrative mortgage backed securities

before gold reaches $1400/oz. Regarding weekly FX research notes, there

have been many recommending selling USD/CNY one year forward as both an

Asia, reval, and even USD carry play. One year vols ticked up to 6% from

May 21 lows. This may still be a cheap Asia buy when compared to buying

other Asian currencies at these levels. If China did make a move on the

CNY, the Fed and Trsy market would be very happy and would probably send

them a nice bar of gold as a thank you. (IFR)

WGC sees strong gold investment demand in '09

Global investment demand in gold, seen as a safe haven in turbulent

times, will be strong this year, but weak economy will hit jewellery and

industrial demand, a senior official at the World Gold Council said on

Friday. Global gold demand jumped nearly 40 percent in the first quarter

of this year, powered by a more than threefold increase in investment

demand while jewellery and industrial demand dropped, the WGC said in a

report last week. "We expect to continue to see strong investment demand

and constrained industrial and jewellery demand in 2009," Rozanna

Wozniak, investment research manager at the industry-funded WGC told

Reuters in an interview at a WGC presentation in Milan. Wozniak would

not be drawn on more precise forecasts. She said investments in

exchange-traded funds (EFTs) were unlikely to keep the high growth pace

seen in the first quarter but would remain a stable driver of gold

investment flows. Global jewellery demand which used to account for more

than half of total gold consumption is traditionally weak in the first

quarter and usually picks up later in the year on the back of wedding

seasons and Christmas sales period. Wozniak said there were signs of

jewellery demand picking up at the start of the second quarter in some

countries where buyers are sensitive to price fluctuations like India

and the Middle East, but it was "too early to read too much into it."

Global gold demand trends seen in the first quarter would likely be

repeated in the second quarter, she said. "Given the economic

environment that we are in now we would expect these sorts of trends to

continue," Wozniak said. Gold recycling eased at the start of the second

quarter after surging in the first three months of this year and it

remained unclear whether the current price upturn was strong enough to

trigger a new wave of used gold selling, she said. "Once you sold off

little bits and pieces that are broken or you don't want any more, the

emotional attachment is much stronger ... It requires a much higher

price to encourage the next wave of recycled gold to come into the

market," she said. Wozniak said in the presentation longer-term supply

would remain tight because gold mine output was expected to be flat and

central banks to play a decreasing role as gold sellers.

[OriginalPoster]

If it's in a cash account yes, if in an IRA, no.

LRB, i claim that not only german Klingons but all non-U.S. investors in this galaxy abhor obsceneties such as IRAs

Why do you think that IRA's are an obscenity, is it because you are morally opposed to people avoiding taxation?

Edited June 2, 2009 by OriginalPoster

[Naam]

If it's in a cash account yes, if in an IRA, no.

LRB, i claim that not only german Klingons but all non-U.S. investors in this galaxy abhor obsceneties such as IRAs

Why do you think that IRA's are an obscenity, is it because you are morally opposed to people avoiding taxation?

of course i am not opposed. au contraire! what i oppose are the handcuffs which are attached to IRA's, 401k (as well as similar setups) restricting the investor to move his money globally freely around and buy whatever assets he pleases without any restrictions (see e.g. "SEC rule 144") or investing his hard earned money in a way that the greedy claws of the IRS cannot over and over and over again take away a share from the proceeds.

[flying]

of course i am not opposed. au contraire! what i oppose are the handcuffs which are attached to IRA's, 401k (as well as similar setups) restricting the investor to move his money globally freely around and buy whatever assets he pleases without any restrictions (see e.g. "SEC rule 144") or investing his hard earned money in a way that the greedy claws of the IRS cannot over and over and over again take away a share from the proceeds.

Boy I have to agree.

Had a IRA only because a company I did project management for in 2000-2005 did a matching deal up to 10% of income.

So I finally decided screw it I was closing it.... After all the early withdrawal penalties from both the fund & the govt I was lucky to break even.

So that was a waste of time & money. That will not happen again

Edited June 2, 2009 by flying

[cloudhopper]

I bought $XAU puts instead.

If this was based on some type of wave analysis does it predict how low the gold price might reach? Is the $1200 figure (if that analysis proves incorrect) based on a TA of some type as well?

[lannarebirth]

dividend yields are nothing but polaroid photos of the meals served last time. nobody knows what the cook will put on the table next time. bondholders know what they will be served. if a company goes bankrupt shareholders are wiped out, bondholders can still expect a certain recovery value and/or a restructuring. exceptions like Enron et al just prove the rule.

shareholders / bondholders = never the twain shall arrive at a common denominator

i forgot to mention something which investors like me consider very important, namely the fact that in nearly all cases those who invested in stocks have to share their dividends with the local taxman. the U.S. of A. charges a withholding tax of 15% plus an additional 15% "backup withholding tax" if the investor's tax residence is not in a country which signed a double tax agreement with the U.S.

but even if the latter applies, the first 15% are gone with the wind if the investor has no possibility to deduct them from his domestic tax liability (as is the case of retiree living in Thailand who does not pay income tax). other countries, like Switzerland deduct 35%, U.K. and Germany 25% and Italy 15%.

If it's in a cash account yes, if in an IRA, no.

LRB, i claim that not only german Klingons but all non-U.S. investors in this galaxy abhor obsceneties such as IRAs

And quite rightly too. Still, if structured correctly and put in the right brokerage, with universal trading permissions, it can be useful.

I tried the "offshore" route that disallowed all US oriented trading. For me, I found, that I could make more money trading against the devil I know. I was too disoriented in that other milieu.

You're not wrong about taxation either, but IF they keep there promises (I know, big if) most all will have been avoided in this retirement account.

[lannarebirth]

Gold stocks are just about catching up with last years prices when Gold was at it's previous highs / I think they still have a lot of catching up to do IF gold can establish itself over 1000 - I think Gold Stocks could double plus from here - so I think from this level one can gain a lot more by investing in gold stocks as opposed to physical gold .

You may well be right, but I bought $XAU puts instead. If I'm wrong Gold will probably see 1200 PDQ.

lanna,

you bought $XAU puts again? I remember you bought them way up (down) there when the AUD what almost trading par (?!?!) with the USD, and IIRC u should have made some nice money on that trade I hope this one goes your way too.

I really don't like standing in front of speeding trains, but sentiment stuff and some particularly elegant market geometry said it was worth a shot. Options limit risk, so it is my vehicle of choice in markets I don't trade regularly. Could get blown out by tomorrow. We'll see.