Investment Guide|Precious Metal Investment Expert » currency

Silver Was Our Best Bet

PreciousMetalInvestment.com — Tue, 09 Mar 2010 12:18:34 +0000

Our editorial team was unanimous in expecting the precious metal markets to start this week in a seriously upbeat mood. Silver was our bet for outperforming gold, platinum and other PGMs after the expected profit taking at the end of last week turned out not to be as severe as we thought.

We felt that both the technical and fundamental criteria were in place for the next leg up particularly as the precious metals have shown good underlying strength for the last several weeks.

Monday’s trading and today’s mid morning European trading has undermined our confidence as spot silver plunged briefly below $17 an ounce before leveling off at $17.05 while gold is toying with $1117.50 as we write.

Amongst PGMs both platinum and palladium are hanging on to slight losses so far.
This scenario leaves us at somewhat of a loss as so many factors affecting precious metals have to be taken into account and the flavor of the week seems to constantly change.

Last week, the prime mover was currencies as we had gold hitting all time highs against both the Euro and the GB pound. Meanwhile the dollar price of gold fell from circa $1145 an ounce while its value against a basket of currencies ended up relatively static.

Will currency movements continue to be the overriding mover of precious metals or will the fear of inflation take over? It may be that coming to the fore will be some added impetus to the fear of a China bubble imploding that some pundits have promulgated.

As we said earlier there are many situations that can take over the lead in affecting the prices of precious metals at this time of global uncertainty and diminishing faith in governments abilities to get their citizens out of the mess that they have allowed to develop.

Meaning that whatever happens to gold, silver and PGM prices in the short term we remain confident that the most reliable investment that the investing public can make to preserve the value of their capital is gold or silver, preferably via an easily tradable ETF holding bullion or a direct purchase at Bullion Vaults

Platinum Prospects For 2010

PreciousMetalInvestment.com — Wed, 30 Dec 2009 17:55:36 +0000

The first year of the new decade is likely to set the scene that could last until 2013 maybe longer.

Investors may face either the prospect of a period of deflation, possibly setting in by the end of the first quarter of the new year, followed eventually by considerable inflation. The alternative is steadily increasing inflation for as long as the US, Europe and others can keep their new money printing presses churning out new banknotes while using every trick they can think of to delay the inevitable blow up.

The BRIC nations particularly China, and other developing countries, have clearly signaled their loss of faith in the US dollar and its status as the world’s reserve currency, and their reluctance to take on any further US debt. If we believe the latter, that western politicians will continue with the economic policies they have so enthusiastically embraced in the past twelve months then Platinum’s prospects for 2010 can be considered rosy.

With Obama’s dash for frittering away the US dollar, coupled with ‘follow my leader’ tactics from other western administrations, whose diminishing hope is to put off the day of reckoning by continuing to flood the market with bank notes, treasuries, etc. bearing the promise of payment in their exchange.

Therein lies the problem, the promise of payment is in exchange for more worthless paper, not of any asset of substance, gold is the first to come to mind but there are alternatives.

That Platinum is a precious commodity is without doubt and yet it is not considered, by the population at large, to be a safe haven metal, hedge against inflation and store of value on a par with its less valuable cousins, gold and silver.

However it has advantages to canny investors not enjoyed by gold and silver. In the scenario that we expect to play out in 2010 and beyond, we must assume that flooding new money into economies will result, however temporary, in an improvement in the business environment, that the feel good factor of higher wages, fuller employment and coupled with government spin, will aid industry in the west, particularly the auto industry.

In the meantime an increasing demand for the finer things in life can be expected from the emerging nations, where sound economic policies aided by populations used to hard work and long hours and who have the habit of thrift, and above all still have huge growth potential, will again benefit manufacturing, with automobile demand likely to be among the leaders.

With platinum essential in the production of catalytic exhaust systems any increase in confidence in auto production and sales is reflected in its price.

Coupled with South Africa’s continuing decline in production, the world’s largest platinum producer is not going to reverse the trend in the foreseeable future. It is not just the miners union that has disrupted production, the main cause has been the country’s electricity supplier (Eskom) being unable to provide reliable power and has yet to address the combined problems of lack of managerial competence and funding to expand capacity and modernise existing power stations.

Annual platinum production falling ,auto manufacturing increasing demand means that no vehicle manufacturer can afford to be without adequate stocks of the catalyst.

If you believe, as we do, that however artificially created, 2010 will herald the great confidence trick that recession is behind us and that prosperity has returned to the western world then platinum looks a good each way bet.

By the time the recklessness of our politicians eventually results in massive inflation with the bottom falling out of stocks and government securities, hopefully we will have seen platinum back above $2000 an oz and cleared a profit. If we get our timing wrong at least we will own a precious metal that will retain some reasonable value.

You can invest in physical platinum held on deposit in vaults in London or Zurich from as little as one ounce. Go to www.goldmoney.com for details. ETFS Physical Platinum (PHPT) is an ETF holding physical platinum, go to www.ctfsecurities.com for more info.

Three Possible Outcomes To Gold Scenario

PreciousMetalInvestment.com — Mon, 06 Apr 2009 12:20:33 +0000

Stock markets in Asia and Europe continued last week’s show of strength in trading sessions this Monday morning with indications that New York will follow suit.

Base metals and miners were among the leaders but last weeks fall in gold and silver gathered pace hitting $874 an ounce before staging a slight recovery to $880 an ounce possibly only due to short covering.

Rebounding equity markets, an improvement in sentiment in the belief that government bail outs are showing signs of working, increased investor risk appetite and the IMF’s impending sale of 403 tonnes of gold are taking their toll on precious metal prices.

Many are now saying with confidence that the recovery will begin later this year or early next, and, as we gurus are supposed to know, the stock market looks six months ahead, or at least it used to!

On this premise the outlook for gold and silver, the so called safe haven assets, is not encouraging as the politicians efforts bear fruit and economies revert back to the good old days of borrow and spend pushing stocks, real estate and other asset classes back to and above their 2008 highs.

Who knows, even those toxic mortgages might come good as borrowers find the wherewithal to restart their payments.

We conclude that there are three possible broad outcomes to the present day scenario and all three will have one single dominant factor in common.

The dollar, the Euro, the British Pound and many other currencies will lose a stunning amount of their purchasing power whichever scenario plays out.

This is what ‘Joe the plumber’ calls inflation otherwise known as inflating the money supply – printing presses and all that!

First of all what we are currently experiencing may turn out to be a false dawn. In a few days or weeks the current rally may prove to be a ‘dead cat bounce’ and stocks will drop even lower than they already have.

Risk appetite will disappear and gold and silver should benefit as stocks wither and the future for other assets look as bleak as they did two weeks ago. The result will be more bail out money being thrown at undeserving causes and their executive beneficiaries.

Secondly, this may turn out to be the turning point and it will be all plain sailing for six months, maybe a year or three.

We all get back to filling our shopping bags, crowding into the ‘out of town’ malls, burning gas and eating out several times a week as our credit cards return to normal use.

Everybody who wants one will get a job and expect their wages to keep pace with the spiralling cost of living. The cost of houses and apartments will return and even exceed their past highs.

The US Government, who is the major provider of mortgages, will fuel this return and more than likely make a major contribution to cheap low/no deposit auto loans and other sops to the electorate.

Whether the politicians can sustain this feel good factor until the next election remains in the balance but you can be very sure of two things, inflation and an eventual collapse that will put this current depression into the shade. Then the only resources that will retain any value is gold and probably silver.

Thirdly, the alternative and, as cynics, we believe to be the least likely to occur is that governments will wake up to the fact that their current policies of printing money and then throwing it at every bank, financial institution and industry and then any left over at ‘make work’ schemes is flawed and fraud!

To cleanse the system market forces should be allowed to work without government intervention. Overpaid executives should pay much higher rate of tax on their pay and their other privileges, government expenditure cut to the bone, personal credit facilities limited – you get the picture!

Whichever of our three scenarios comes to pass there will be pain and suffering, bankruptcies, unemployment, many homeless and without hope. Lets face it, this is already becoming a fact in Western democracies so rather than delay the evil day surely it would be better to get it over and done with as quickly as possible, learn from past mistakes, bring some moral rectitude back to politics and make a fresh start.

In the meantime we have the spectre of 403.3 tonnes of gold overhanging the market. Lets just put that in context, this represents 14,215,422 ounces at say $900 an ounce.

A total of US$ 1,279,387,900 sounds a lot but the average daily turnover on the London Bullion Market last year was in the region of 18,300,000 ounces, 4 million ounces more traded every day!

Think about the size of the US deficit and then consider how far the IMF can go in helping out busted countries with the money raised by the sale.

Our conclusion is that there are a lot of short term traders out there who have climbed in on the ‘gold rush’ for some quick profits without doing their homework, probably solely relying on their charts and the IMF’s announcement.

At the same time the US government is happy to see gold fall as it makes the dollar look relatively stronger so we would not rule out a little help from the authorities.

It may be a long hard ride with many a fall on the way, but we believe that eventually gold will prove itself as the only safe haven asset, hedge against the inflation to come and remaining store of value.

It is a market we have been tempted time and again to play the short term game, at times we despair that our reasoning is wrong, that we are out of whack with market events, that bias has clouded our judgement, but our constant reality checks keep coming up with the same answer – stick with gold and a little silver.

Gold Bubble Driven By Inflationary Concerns

PreciousMetalInvestment.com — Mon, 23 Mar 2009 20:33:04 +0000

Gold stays firmly in the news as today’s’ ‘Prudent Bear’ financial column in the UK’s Daily Telegraph and written by Martin Hutchinson suggests that ‘ a gold bubble driven by inflationary concerns may (now) be inevitable.’

Quantative easing, politico speak for money printing, is having its inevitable effect on the dollar, pound and Swiss franc as they decline against currencies that have yet to embrace this questionable economic cure, although the Euro has so far not yet succumbed to the temptation.

We don’t know how long for, but sooner rather later seems a safe bet.

This pressure on three leading currencies, with one likely to follow, is likely to be reflected in continuing interest in the wealth preserving virtues of gold.

Furthermore the undermining of the US dollar as the world’s reserve currencies is getting underway with no sign of any response yet from Capitol Hill.

We could only stand back in awe at a comment made on Bloomberg by Alan Ruskin who is head honcho of international forex strategy at RBS that

‘this is the start of the debasement of the world’s reserve currency’

‘In the grand sweep of history we are witnessing the end of Rome on the Potomac’

Hats off to a great command of words, even Obama would find difficulty in expressing himself in such a short and succinct way!

But for the sake of our futures and those of our children and grand children we fervently hope that Mr Ruskin is wrong.

Despite the fact that so many of our civil liberties have been eroded, led by the US and followed by Britain’s political easy option lapdogs, and quickly encroaching on Europe, the fact remains that our watered down western version of democracy is still a preferable option to any other alternatives.

The Muslim threat is growing, with the Taliban who are unable to treat their own mothers with dignity, is about the worst case scenario, so lets just hope that the good old US can get back on track and preserve, not only our own way of life, but improve and enhance that of the rest of the world.

Of course it is unlikely to happen as intelligence, moral rectitude, dedication to the people, honour etc., etc., is no longer on the ‘must do’ list of priorities of our current world leaders, President Obama has yet to impact one way or the other but the portents are not favourable so far.

What does that leave us with after that rant? Gold!

It’s fast becoming every man for himself so don’t miss the boat, ride the gold bubble! Follow up with silver. Keep an eye on the Gold/ Silver ratio and be prepared to switch between the two for some short-term action but do not go short on either!

Please let us all keep our fingers crossed that the US can ride out this storm and that Obama is not ‘all mouth and no trousers’ and does have the political will and backbone to take the unpopular decisions necessary to keep America in the driving seat.

Gold Slips | Is It Time To Buy The Dips

PreciousMetalInvestment.com — Tue, 10 Feb 2009 14:09:57 +0000

Gold slipped below $900 an ounce yesterday, falling as low as $892 an ounce during trading as investors took the chance to cash in on profits made from the recent rise.

We don’t think that this is a signal to “back up the truck” it is just that gold sector players are very twitchy in these most volatile times, particularly with the uncertainty that the Obama bail out plan will prove sufficient to prevent economic catastrophe from becoming a reality.

It is not that we are becoming doom mongers but in the publicly announced words of a leading British government minister, it will be the worst slump in 100 years, even worse than in the thirties!

A previous aide to the Governor of the Bank of England has stated that the presses will have to churn out the pounds to pay for the money being thrown at banks, and all the other claimants for government cash to help keep the good ship SS Britain and its crew afloat.

Some cynics might suggest that this is just a despairing effort for a short-term solution in the hope that it will prevent a total wipe out for the incumbent Labour government at the elections that must be called in less than eighteen months.

Britons of a certain age will remember the last time a Labour government held office resulted in the IMF having to bail out the country and consigned the socialists to the political wilderness for over ten tears.

Led by an even more intellectually challenged Prime Minister than previous socialist incumbents of the office, the writing is firmly on the wall.

President Obama and his predecessor led the way with massive handouts to banks, mortgage lenders, et al. and doubtless this will be a continuing pattern until supply and demand basics reassert themselves.

At least the President does not have the problem of an imminent election to win, but to the impartial observer he has shown that “he can talk the talk” but it remains to be seen whether he can “walk the walk”.

One thing is an absolute certainty, just as in Britain, Europe, Australia and others those printing presses will be working full time. End result can only be high inflation, the dollar in your pocket will buy less and less in the course of time, just as it has done for past decades only this time at a rapidly accelerating pace.

Don’t let the prospect of deflation lull you into a false sense of security, it will only be a temporary phase that will not hold back the march of higher prices across the spectrum of essential goods and services for very long.

To exacerbate the situation, can anybody seriously believe that the Chinese, and other major US currency and bond holders, are going to sit back and take no action as they see the value of their holdings sink into the quagmire, particularly as the new administration, in the person of Mr Timothy Geithner, secretary of the US Treasury, has got off on the wrong foot by accusing the Chinese of currency manipulation.

It seems to us that this slip in the price of gold below $900 an ounce is a buying opportunity. As the saying goes (with our own amendment) “buy the dips and hold your nerve”

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