China May Convert Upto $1 Tn of FX Reserves Into Gold...Bloomberg Newswire

In an otherwise quiet article on central banks today, Bloomberg quoted an analyst who says China may use up to a third of their $3 trillion in foreign reserves to purchase gold. China has been moving away from the dollar, and into alternative stores of wealth for years now. But $1 trillion in gold? If it plays out, such a move would further threaten the dollar's status as reserve currency. It would provide further buying pressure in gold for years to come, as the dollar crumples into a pitiful heap on the floor.

 

China’s Gold Reserves

China, which has just 1.6 percent of its reserves in gold, may invest more than $1 trillion in bullion, [Michael Pento of Euro Pacific Capital] said. “China wants to be an international player, and they need to own more gold than they currently have.” ...“China is out to have more gold than America, and Russia is aspiring to the same,” [Robert] McEwen, [the chief executive officer of producer U.S. Gold Corp] said yesterday in an interview in New York. “When you have debt, you don’t have a lot of flexibility. China wants to show its currency has more backing than the U.S.”

...China, with more than $3 trillion in foreign-currency reserves, plans to set up new funds to invest in precious metals, Century Weekly reported this week. Russia purchased 8 tons of gold in the first quarter.

 

This is a big reason why gold and silver are heading higher. Occasional dips are inevitable, of course. When they happen bears will declare the bubble popped (after a one-week correction). Then the uptrend will continue, intact. And they'll say, "bubble! bubble bubble bubble bubble, bubble!", again. And gold bugs will be laughing all the way to the vault.

 

That's how I see it, anyway. Could be wrong, it's happened before. But, I did say the same thing when gold was $1140 inWhy I'm Buying the Gold Dips in December 2009:

 

"The bottom line is that Bernanke and crew actually want inflation. It's easier than the alternatives: raising taxes or slashing spending. And it will help erase debts. It will also wipe out the savers and reward the borrowers — but that seems to be the path we're on, like it or not. 

Besides, do you really think they will allow America's debt to be paid off with dollars worth more rather than less? Of course not. Devaluing our currency and printing money are part of a strategy. A reckless and morally hazardous one, but still a strategy.

So that's why I still am bullish on precious metals. I'm hoping for a nice pullback in gold and silver. It'll be a great buying opportunity. Once everyone realizes that the Fed's printing presses are just getting warmed up, it'll be off to the races again."

 

The time will eventually (and sadly) come to sell significant amounts of precious metals, but I just don't see us being close to that point yet. Inning 4 or 5, if this were a ballgame, perhaps? " Lots more printing ahead, though it's hard to say how much. My view has been that we see at least QE5 (possibly under a different name) and $3,500 gold and $150 silver before things top out.

 

It all depends on how much inflation the public will take before it declares shenanigans; forcing spending cuts and a tightening of monetary policy. Then - after a (hopefully brief) adjustment period - America and the world will be on a path to sustainable growth. A time to move from being overweight in metals, and shift into stocks and real estate.

 

 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

Silver Price History

30 Day Silver Price 60 Day Silver Price 6 Month Silver Price 1 Year Silver Price 2 Year Silver Price 5 Year Silver Price 10 Year Silver Price 20 Year Silver Price

Are The Gold Bulls Consolidating?

It might appear that way to the casual viewer of the gold market’s gyrations over the last six weeks. But, below the surface, gold’s bull market has been strengthening.

One of the biggest improvements has been on the sentiment front: Even though gold bullion is trading at almost precisely the same level it was in late November, when I last devoted a column to gold sentiment, the mood among gold traders is markedly more subdued today than then.   

From the perspective of contrarian analysis, this is a bullish development.  

Consider the average recommended gold market exposure among a subset of short-term gold market timers tracked by the Hulbert Financial Digest (as reflected by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). This average currently stands at 33.6%, which means that the average short-term gold timer is allocating two-thirds of his or her gold-oriented portfolios to cash. Six weeks ago, in contrast, the HGNSI stood at 40.3%.  

In other words, gold bullion’s year-end rally to above the $1,400 level, and subsequent retreat over the last couple of weeks back to where it stood in late November, has succeeded in wrenching even more bullish sentiment out of the gold market.  

According to contrarian analysis, major market tops are typically accompanied by excessive levels of bullishness that are stubbornly adhered to in the face of any market weakness. On neither count does the current sentiment picture qualify.  

A similar pattern to what we’ve experienced over the last six weeks is the declining bullishness witnessed since mid-September, some four months ago. At the time, with gold bullion trading below $1,300 — more than $100 below its current price — the HGNSI stood at 59.2%. That’s nearly double where it stands today, despite bullion today being much higher.  

In other words, in the face of a four-month net increase in gold’s price of over $100 per ounce, the average gold timer is today only slightly more than half as bullish.

This is a textbook illustration of the kind of wall of worry that bull markets like to climb.
 

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

Gold to touch $2000+, Silver to hit $50+ in 2011: John Embry

NEW DELHI (Commodity Online @ MarketDhara.Com): Gold and silver price predictions continue to dominate the New Year headlines these days. While celebrated commodities investors like Jim Rogers have predicted that gold price would zoom over $2000 per ounce in this decade, several investment banks are forecasting gold price to be in the range of $1500-$1800 in the next five years.

John Embry, Chief Investment Strategist at Sprott Asset Management, has come out with his forecast on gold and silver for 2011. In an online interview to News MarketDhara, Embry--a leading voice in investment circles around the world--says gold price will touch $2000 and silver would hit $50 in 2011.

“I’d be disappointed if it didn’t trade through $2,000 this year, in that event if gold were to make a run at that, silver is a layup for $50,” he said.

Embry said that the returns over the last 10 years, gold returned over 18% and silver close to 24% annually. These are spectacular returns and we haven’t seen anything yet, we’re not even close to the third leg which is the blowoff.

“This may be the best opportunity you’re going to get at least from a price sense to buy gold and silver in the next few days. I think when this correction however long it will last is over, it will probably mark the lows for the year which will then be the liftoff to the eleventh consecutive year of higher gold prices," he said.

When asked once again about tightness in the silver market Embry remarked, “There is infinitely more demand for physical silver than there is supply. I mean all of this stuff coming out of the ground is long since spoken for by traditional industrial and medical uses and what have you. And now with investor interest picking up, I just saw that on the 3rd of January there was 1.7 million silver coins sold in the United States which was equal to the amount that was sold in all of the month of December. So, investment demand for silver is going off the chart, this could only mean dramatically higher prices.”

When asked about his themes for 2011 Embry stated, “Basically I think we are going to see more of the same. I mean I don’t see how you could possibly shut off the paper spigot without causing a depression, the likes of which would make the 30’s look like a picnic. If that’s the case then you’ve got to continue to focus on hard assets, and when you get these violent corrections...you’ve got to be in a position to buy them. The things that I would be avoiding like the plague are bonds, particularly long bonds.

...Things are sufficiently dire that I think we are going to have to recast the monetary system before this is over. And in such an undertaking I suspect that gold may be remonetized, and given the amount of paper there is in the world, I mean it will have to be remonetized at a price which would sort of stagger the doomsayers today on gold. There are still more people talking negative on gold today than there are positively believe it or not,” Embry added.

“Show Me The Money….”

Mohit Gupta | MarketDhara@Gmail.Com

I read a quote by a famous US based Futures trader named Ed Seykota, around twelve years ago. He said “Everybody gets what they want, from the markets”. It is only recently, that the true import of this statement dawned upon me.

When you ask market participants what they want from the market, they will all say that they want to make money. However, things are not always what they seem. There may be different reasons for being in the market and making money through price differentials may not be prime amongst them. Here are a few examples :

The day trader: He is in it for the action. If you ask him a hypothetical question whether he would like to earn Rs. 10 per day through day trading or Rs. 100 per week by trading once a week, most probably he will choose the former. For such people, it is the thrill of being involved with the rough and tumble of markets that is exciting. Many even use the colloquial term “Time-Pass” when asked as to why they are glued to the screen 5×5 (Five hours a day for five days in a week). Money is the ostensible motivator but the real reason is “the kick” which they get from being a part of the action.


The stockmarket analyst: The markets have given birth to this animal called an analyst. However many a time, making money from his/her recommendations is the last thing on the analyst’s mind. They are in the market only because it offers them a well-paying job. Analysts who work in large brokerage houses usually do not buy the stocks they recommend. They justify this strange behaviour by citing “compliance-related” reasons. It is rather surprising that the compliance department does not permit an analyst to put her money where her mouth is. Not that many analysts mind it. They relish the accoutrements that accompany their job. Analyst meets in five-star hotels, plant visits in scenic locations, the networking with other analysts (which may help in securing a lucrative new assignment), etc. Why bother to stake your capital in the market when your job gives you everything without any risk…


Some company promoters: For many promoters, stockmarkets are a necessary evil. They are required for periodic fund raising and nothing more. For them, despite being market participants, money is made through their business and not from price gyrations. Of course, for investors it may make sense to tag along with managements who are involved with developing their business as compared to those who have an eye on the quotation screen.

Brokerage houses: They aim to make money by making others transact as much as possible. They are not so much concerned with price movements, as to find reasons for stimulating action among traders. In a sense, the day trader and brokerage houses share a symbiotic relationship. If the day trader is seeking action, the broker does his utmost to provide it.


The financial media: Though not strictly “market” participants, they certainly mould the opinions of several people in the market. By virtue of their daily appearances many media personnel are elevated to the status of “stars” and exult in the adulation and feeling of power that accompanies it. They love the market as that is their vehicle to stardom.


The investor: He is the most invisible market participant (save and except for a few whom the media anoints as a “Wizard” or “Oracle”). He is the one who is really in it for the money and he tries to attain his objective in as unobtrusive a way as possible. Large investors come into the limelight when they make an open offer etc. but there are many other individuals or outfits who disregard the glitz and glamour of the stockmarket as it is irrelevant to their main objective, which is wealth creation.

Seykota himself was a semi-recluse who operated far away from Wall Street as he wanted to remain unaffected. He was clear about what he wanted from the market.

Are you frustrated about not making money in the market? It may be worthwhile pondering as to whether that is what you really want or are the markets already giving you what you want and you are not aware of it…..

How are Gold and Silver As Investments - A Comparison

An argument for holding both gold and silver including 22 things to ponder in comparing and contrasting the two precious metals. (An modified version suited to Indian Metal Investors & Traders Community).

Special Thanks to Author: Jerry Western 

NEW DELHI/TORONTO (FINANCIAL_ARTICLE_SUMMARY) -

Silver has had quite a run the last couple months so it's no surprise that it has gained much attention and interest from investors - even more so than gold.  It is extremely volatile, however, and tends to rise or fall in spurts so I'd like to focus on its attributes as compared to gold, make a case for holding some, and discuss some ultimate price possibilities.

Gold is known as the ultimate form of money; the king of money.  Silver is generally thought of as gold's little brother or ‘Poor Man's Gold'.  It is said that:

Gold is the money of Monarchs,

Silver is the money of Gentlemen,

Barter is the money of Peasants, and

Debt is the money of Slaves.

Both gold and silver have been used as money forever.  Historically, the price of gold has almost always been greater than that of silver.  This is because silver is ten to twenty times more plentiful in nature.

SHOULD WE ONLY HOLD GOLD? 

I say no for the following reasons:

1. You get more (metal) for your money holding silver. 

2. The price of silver has more room to appreciate, both because of its relative low price and because of the current relatively high gold:silver price ratio. 

SHOULD WE ONLY HOLD SILVER? 

 I say no again - for the following reasons: 

1. Gold is highly recognizable and highly coveted in all societies.  Most world governments and central banks hold gold but virtually no silver, save a few notable exceptions (Russia, China, and India).  They know that gold is the ultimate money. 

2. Just as you would diversify your portfolio among asset classes and large/small cap stocks, etc., so too should you diversity between gold and silver.  No one knows which will appreciate faster or further and be the superior investment going forward.  Therefore, I hold both.

WHAT ARE SILVER'S MAJOR ATTRIBUTES THAT SHOULD BE LOOKED INTO?

Silver has three massive attributes that make it special, valuable, and unique:

1. Versatility: silver has many and varied important uses where it is the best solution.  It is either the best material to use for a given application or it is the least expensive of all the alternatives.

2. Inelasticity: more silver is not produced as price increases because most silver comes from other-than-silver mines, and less is not consumed as the price increases because there are no less-expensive alternatives.

3. Duality: silver has the potential to do well price-wise in both an up and a down economy.  Being both an industrial metal as well as money in and of itself, silver tends to have a market no matter the condition of the economy.

HOW DO GOLD AND SILVER COMPARE?

Below are 22 things to ponder when comparing and contrasting gold and silver, in no particular order:

1. Gold is hoarded and the above-ground stockpile is continuously expanding.  Silver is consumed and is uneconomical to recycle in most uses.

2. There is greater than 300 times the dollar value of gold in above ground form as there is silver.  Silver is the smaller market by far.

3. According to the U.S. Geological Survey, there are fewer years of production of silver left in the ground than any other metal or mineral, including gold.

4. Silver is used in more applications than any other commodity (aside from petroleum).

5. About 30% of silver comes from primary silver mines.  Approximately 70% is byproduct of other primary metal mines.  Most gold is produced from primary gold mines.

6. There is less gold mined than silver, but there is more gold than silver bullion in existence.

7. Both gold and silver have been selling near or even below the cost of production for the last 15 years.

8. Both gold and silver are up over five fold since the beginning of this current bull market.

9. Silver is used in industry and for investment.  Gold is used almost entirely for investment.

10 Silver is more expensive or difficult to store (or hide) than gold because you get more for your money.

11. It would be easier for silver to rise higher on a percentage basis than gold due to the ‘law of large numbers'.

12. Only about 2% of the 160,000 tonnes of gold unearthed over the last 5,000 years has been lost and is unrecoverable according to Goldfields Mineral Service (GFMS) and the World Gold Council (WGC) while most of the silver ever mined is unrecoverable and gone for good.

13. Silver supply and demand are both ‘inelastic'.  This means that supply cannot be ramped up quickly when its price rises.

14. The National Inflation Association (NIA) picked silver as its investment of the decade in December 2009 .

15. The Silver:Gold Price Ratio favors silver appreciation to return to historic norms.

16. Both gold and silver tend to rise and fall in price together but not necessarily in percentage terms.  Their price movements are still highly correlated though.

17. In precious metal bull markets, silver always outperforms gold before it is over. Silver has a tendency to underperform gold as a rally in the metals gets going, however, it tends to greatly outperform gold near the market tops.  At its peak, for example, gold was up nearly 250% in early 2008 but silver was up well over 300% at the same time from the beginning of 2002.  As the metals both declined throughout the remainder of 2008, silver fell farther than gold from peak to trough.  Silver fell nearly 60% while gold fell about half as much or 30%.  Now on the way back up silver is again leading.

18. Gold and silver related stocks tend to greatly outperform on the way up but terribly underperform on the way down.  On the way up, many stocks leveraged the metals 3, or 4, or 5:1 but on the way down some gold and silver stocks lost 90% or more of their pre-crash market value.

19. When the economy is good, silver will tend to outperform and when the economy is bad, gold will tend to outperform.  This occurs because silver is also an industrial metal besides being a monetary metal and, [as such,] is in great demand when the economy is rolling along but less in demand when the economy is in recession.  Conversely, gold tends to be forgotten when times are good and remembered when times are bad.  Even though gold fell substantially during the financial meltdown of 2008, it fell less than did the stock indexes, silver, or oil.

20. I believe silver may outperform gold dramatically before the bull has run its course.  Silver rose more than 38 fold in the 70's bull market; from a fixed price of $1.29 to $50 ($52.50 CBOT).  Silver bottomed just above $4 in 2001.  38 x 4 = $152.  Not a bad initial target.

21. Interestingly, the Silver/Gold ratio bottomed at ~ 16:1 in 1980.  In other words, you could exchange one ounce of gold for 16 ounces of silver near the end of that bull market.  Today, the ratio is about three and a half times higher (~56:1).  Should gold get to $6375 and the ratio return to 16:1 at the top, silver will reach almost $400 an ounce.  That's a 100 fold increase from its pre-bull low.  Remember, we're only playing with numbers here, the markets will surprise and do their own thing in due course.

22. The following two extremely important and potentially explosive events for silver have happened just recently:

a) CFTC commissioner Bart Chilton, in regards to the trading of silver on the Commodities Exchanges, said; "There have been fraudulent efforts to persuade and deviously control that price", and "I believe there have been repeated attempts to influence prices in the silver markets", and  "the public deserves some answers to their concerns that silver markets are being, and have been, manipulated." 

b) Two separate lawsuits against JPMorganChase and HSBC for manipulating and suppressing the price of silver futures on the Comex in violation of the Commodity Exchange Act and the Sherman Anti-Trust were filed as class action suits. Any hint that these suits have merit and may be settled in favor of the complainants or a finding of price suppression by the CFTC in its current silver market investigation, could send the silver price sharply higher.

WHICH IS BETTER TO OWN - GOLD OR SILVER? 

I own some of both but I believe that silver will outperform gold in the end.

Mohit Gupta is the Co-Founder, MarketDhara.Com and have extensive experience sharing strategies on how to protect one's wealth in the 21^st century The Gold-Silver rush. He is a contributor to many leading trade e-zines, financial journals and online forums.  Mohit can be reached at MarketDhara@Yahoo.Com.