FALSE GREEN SHOOTS?

Be wary of the markets - gold still offers the best insurance

Past major bear markets have seen false new dawns which have tended to be short lived and the recent big uptick in stock markets could be another of these, so don't disinvest from gold yet.

Author: Lawrence Williams
Posted:  Monday , 11 May 2009 

NEW YORK  - 

In a week that has seen global stock markets continuing to perform positively, gold has done remarkably well given that many experts are predicting the start of a new bull market. There has been little, if any, disinvestment from gold over the period, which suggests there are many out there continuing to hedge their bets.

And indeed they may well be wise to do so. Major bear markets of the past have seen big upswings during their progress, sucking investors back in, only for the upturns to end dramatically as some further major financial collapse spooks the markets again and prices tumble.

The global economy remains unstable enough for there still to be some nasty events out there which could do this. The duration of these upswings in past major bear markets has tended to be for periods of between five and seven weeks, which suggests we could be near another major downturn if history repeats itself - as it frequently does.

The global debt position is still an enormous cause for concern and many of the noises coming from politicians talking of "green shoots" and "safety nets" seem to be little more than hot air designed purely to try and build general confidence. In itself this is perhaps a justifiable position, but the whole deck of cards can equally come crashing down when a single significant event occurs belying the political rhetoric.

So gold, which thrives on economic uncertainty, should continue to play a major part in wealth preservation. It thus makes sense for at least a significant portion of one's wealth to be invested in gold and gold stocks - and maybe also in silver which tends to follow gold, but in a more volatile pattern.

Remember silver came back a huge amount more than gold as both fell back from their peaks, and it could thus increase in value faster than gold. (But also bear in mind that silver investment tends to be riskier than gold because there is a much greater industrial element in silver demand and usage than for gold and industrial growth is currently flat to negative in most parts of the world.)

At the moment the US dollar is holding up reasonably well in relation to other currencies, and inflation is proving to be minimal, but the whole system of pumping money into the economy at unprecedented rates developed to shore up world economies has to be inflationary sooner or later - and may even become hyperinflationary in some countries. Should the dollar start to fall back and inflation pick up, this would be a double whammy in terms of boosting the gold price and this could soar while the purchasing value of other investments, of salaries - and of pensions in particular - could dive dramatically. This may be almost a doomsday scenario, but one does need to protect oneself against such an eventuality.

There has also been some talk of revaluing gold as a neat way of boosting global monetary reserves and stabilising the global economy, but this may be politically a nightmare and probably won't come about. But again, if more and more people turn to gold amidst continuing economic shock and uncertainty the markets alone could make this revaluation fact and save the politicians from having to try and push through what could be a perhaps unacceptable move.

Overall, therefore, gold looks to have more of an upside potential than a downside. Maybe one should sell one's stock market investments in May and go away as the old adage advises, but it may be foolish to sell your gold!

[mineweb]

gold on its way back to the far from far-fetched $1,000 oz

As I write this I am watching gold sit just under $970/0z.

I read this article on Moneyweb this morning.

As a matter  of intrest we saw this morning, the highest price for a Krugerrand ever! R10,320.

Where is the price going to go? experts are saying that it will hit $1,100 + by the middle of the year. What does this mean for us? Well if the R/$ stays at around R10 we are looking for a Krugerrand price of atleast R12,000 

No plans to change position on gold sales - IMF

n response to speculation that the IMF might cancel its proposed gold sales programme, it has denied that any such change of plans is under consideration.

Author: Jan Harvey
Posted:  Thursday , 12 Feb 2009

LONDON (Reuters) - 

The International Monetary Fund said it does not intend to alter plans to sell just over 400 tonnes of gold to fund changes to its financing base, an IMF spokeswoman said on Wednesday.

A recent surge in IMF lending to countries facing balance of payments crises related to the global economic slowdown and financial turmoil has led analysts to question whether the Washington-based institution will proceed with the plan.

But a spokeswoman for the IMF -- the third largest official holder of gold -- said the sale would still go ahead.

"There are no plans to change the proposal for a new income model," she said.

"The package of IMF governance reforms, including gold sales, was submitted to the U.S. Congress last November, but will need to be reintroduced as a formality," the IMF spokeswoman said. "The timeline will depend on the Congress' schedule."

The IMF agreed in May last year to create an endowment with the profits from the proposed sale of the gold as part of a broader makeover of the IMF's financial structure and investment strategy.

Such a move, however, depends on approval by member countries' legislatures, including the U.S. Congress. With a change of administration in Washington and a focus in the United States on the economic turmoil, the issue of gold sales and more general IMF reform has been pushed to the back burner.

The sale of 403.3 tonnes of gold was originally proposed in 2007 after a committee chaired by Andrew Crockett recommended the IMF adopt a new funding model. The IMF said on its website its finances had become unsustainable after a decline in its lending business.

With more countries now seeking IMF assistance to ward off the effects of the global financial crisis, there is speculation that as this business picks up, it will roll back its plans to sell bullion.

"It is possible that the issue of gold sales to plug a funding gap that is disappearing ... and which are already two years down the line from the Crockett Committee's report, could be put on the back burner," metals consultancy VM Group said in a report.

"At the very least, the IMF's renewed relevance has strengthened the case of those who oppose such sales," it said.

Gold was quoted at $946.25/8.25 at 1821 GMT on Wednesday.

The fund has said repeatedly that sales would be made under the umbrella of a central bank gold agreement to avoid disruption to the market.

The existing Central Bank Gold Agreement, which limits gold sales by central banks to ensure the market is not flooded with bullion, is in its final year and is due to expire in September.

Analysts say the IMF's desire to sell gold is a major indicator that a further agreement will be signed, despite sales hitting a historic low last year as central banks hung onto the precious metal as a 'safe' reserve asset.

Members sold 357 tonnes of gold in the year to September 2008, well below the annual limit of 500 tonnes.

Gold could come into its own as true safe haven--Scotiabank

Scotiabank's Patricia Mohr notes that record gold ETF inflows have boosted gold prices, as gold regains its luster as a true "safe haven."

Author: Dorothy Kosich
Posted: Friday , 30 Jan 2009
click here for original article

RENO, NV -

Scotiabank economist Patricia Mohr says the big picture outlook for gold remains bullish, suggesting "gold could come into its own as a true ‘safe haven' in coming months."

Noting that gold prices have outperformed base metals in the past six month, Mohr advised, "In view of a massive U.S. budgetary deficit likely to surpass US$1.25 trillion in FY2009, Asian and Middle Eastern central banks and sovereign wealth funds may seek to diversify away from U.S. Treasury Bonds and agency debt."

In her monthly analysis of the Scotiabank Commodity Price Index, Mohr highlighted "record investor inflows into gold ETFs...have also lifted precious metals prices, as retail and institutional investors seek a ‘safe haven' from volatile currency and equity markets."

Meanwhile, while commodity prices have not yet hit the floor, Mohr said the pace of their decline is slowing and "the forced, indiscriminate selling by funds-triggered by investor redemptions and tight-credit appears to be subsiding. Many prices are approaching average world cash costs, triggering substantial production cuts, new project deferral and tighter supplies."

Mohr's research revealed the rapid decline in base metals prices "has been unprecedented and reflects in part the forced exit of hedge funds from commodity market positions due to fund redemptions and curtailed credit in 2008:Q4."

However, Mohr noted copper prices have lifted off the recent low, although they remain vulnerable to poor global economic activity and a "huge OECD inventory correction in 2009:Q1."

"Zinc prices have also been supported b pro-active and very unusual production cuts by twenty smelters (including Zhuzhou in Chiba -20%, Trail in B.C. -20% to mid-2009 and Kidd Creek in Ontario -30% to mid-2009," she said. However, zinc prices still remain just below average world cash costs.

Meanwhile, spot potash prices at the Port of Vancouver remained at record levels of $872.50 per tonne last month, "though new business has come to a virtual halt," Mohr said. She suggested that stronger nitrogen fertilizer prices next spring may rekindle interest in potash.

Mohr's research revealed that Scotiabank's Commodity Price Index lost further ground in December for the fifth consecutive month, falling -5.5% m/m.

AngloGold has a strong view on the future of the gold price - Mark Cutifani, CEO

In an interview on SAfm @ 18:25 on 28 January 2009

[miningmx.com] -- ANGLOGOLD ASHANTI is bullish on the gold price and it is positioning the company to take advantage of that, said CEO Mark Cutifani.

"We have a strong view on the gold price going forward, and last year we had a view that gold would trade north of $800/oz on fundamentals, and so we decided to get rid of the hedge book," Cutifani said on SAfm Market Update. "I'd have to say at this stage that decision looks like it's what we've indicated, and so instead of a 20% discount to the prevailing spot price of the day, we are now down to 6% coming the end of this quarter," he said. "And, given our cash cost position, and the very modest discount, we are the most competitive gold business in South Africa, and one of the most competitive in the world," he added. AngloGold said on Wednesday it had sold its one-third stake in Australia's Boddington mine to its joint venture partner Newmont for $1.1bn and the sale means the $200m it had earmarked towards the completion of the development project has now been freed up. "Wat this does now is really position us to again continue to improve returns and look more opportunistically both in terms of our brownfields development opportunities and also other opportunities in the marketplace where some of these smaller companies are struggling," Cutifani said.

2009 gold price revised down - Standard Bank

2009 gold price revised down
Jade Menezies
Posted: Mon, 19 Jan 2009

[miningmx.com] -- The 2009 gold price could average $900/oz because of decreased demand and an easing of a prevailing supply deficit, said Standard Bank in its Equities Research report for this year.

“Our gold price forecast for 2009 has changed to US$900 from our previous forecast of US$980/oz” Standard Bank said in the report dated 16 January. The average price for 2008 was $872. The impact of the credit crisis will be strongly felt on the demand side for gold, it said. “A slowdown in global growth will likely affect fabrication demand specifically gold jewellery, electronics and other industrial components,” said Standard Bank. “We estimate the downturn in fabrication demand could be between 240 tonnes and 360 tonnes in 2009.” The gold price has not been immune to the global financial crisis; however, relative to almost all other commodities it has been an outperformer, said Standard Bank. The up-trend of the gold price depends heavily on the performance of the dollar, for which the outlook in the second half of the year is poor, MD of GFMS Analytics, Rona O’Connell told SAfm Market Update. “We could certainly see the old high challenged and possibly even taken out, but whether we can stay much above $1,000 for any reasonable period of time has to be open to question, I'd have thought,” she said. The main drivers of the gold price will be investment flows and speculators because the physical side of the market is weak, she said. “The investment fraternity is still relatively friendly but, as I say, not quite friendly enough yet, and the hot money is obviously one of the most important elements when it comes to pushing prices,” O’Connell said. “So, increasing investor activity, particularly from the institutions, from pension funds, is likely to create a drain on the metal supplies. That almost by definition would then be coloured by speculative activity, as speculators piggy-back on top of it - and that's going to be driven by economic and financial uncertainty,” she said. Standard Bank said its calculations now showed the physical gold market in a neutral position for 2009 against a previous expectation of a 315 tonne supply deficit. "We believe the gold price will be volatile and will likely rise significantly by fourth quarter 2009 on the back of seasonality and a gradual upward trend in global GDP. We maintain our long-standing view that the supply and demand fundamentals will remain intact for a long-term upswing in the gold price," it said. O’Connell said sales under the Central Bank Gold Agreement fell considerably during 2008 and was unlikely to be much different this year, meaning there is less gold available to the market.

I just found this article, its quite old but has some great points fo investing, especially in gold. You can find the article in its original context here

A beginner's guide to investing in gold

Sep 19, 2007 By Mark O'Byrne

For centuries gold has been coveted for its unique blend of near indestructibility, beauty, rarity and because of its status as a universal currency. Empires and nations have sought to possess gold as a medium of international exchange, as a store of wealth and in order to increase and preserve power. Individuals have used gold as a store of wealth and as insurance against the fluctuations and depreciation of paper money and other macroeconomic and geopolitical risks. Perhaps no other market in the world has the universal appeal of the gold market.Successful investing is about the diversification and management of risk. In layman's terms this means not having all your eggs in one basket. We know from history that markets can and do crash and if you are not diversified your entire nest egg can be wiped out.