Monday, September 20, 2010

Max Keiser interviews Dr. Jim Willie

Gold forecast to rally through $1300

Uncertain economic and financial outlook stokes investor interest. One traditional driver of gold strength, US dollar weakness, proved conspicuously contrary as that currency also benefited from a flight to quality and so frequently strengthened in tandem with gold.

GFMS released Gold Survey 2010 - Update 1, their latest report on the gold market, at a launch in London. The following details some of the highlights of the report from the briefing given at the launch by Philip Klapwijk, chairman of the independent metals research consultancy.

The report devotes much space to the critical area of investment demand, as the consultancy sees this as the prime driver of the gold price’s rally during the first half of the year to record highs. Klapwijk noted here, “gold certainly lived up to its reputation as a safe haven in troubled times. Just look at the explosion in investor interest that followed the sovereign debt crisis unfurling in Europe. And it came as little surprise that we saw this interest strongest in arenas with a clear physical link, such as the ETFs, or in regions with memories of currency shock, such as German-speaking Europe”.

Other factors cited in explaining investor interest included a shaky outlook for the industrialised world’s economies, the maintenance of low interest rates and the still feared threat of future inflation. One traditional driver of gold strength, US dollar weakness, proved conspicuously contrary as that currency also benefited from a flight to quality and so frequently strengthened in tandem with gold.

Update 1 also highlights the critical importance of GFMS’ unique coverage of all aspects of the gold market; despite all this bullish talk of buoyant investment demand, it was, in totality, considerably lower than in the first half of 2009, when financial markets were still reeling in the aftermath of the Lehman collapse.

The consultancy feels that the ability of the gold price to manage record highs this year was to a large extent due to the firmer footing of falling scrap and recovering jewellery demand. Klapwijk added, “It’s hard to see how price gains can be truly sustainable when major fabricators like India and Turkey are net exporters of bullion, the position we were in early last year. However, fast forward to 2010, when Indian offtake jumped by around 170 tonnes, and you can immediately see how investment had a far firmer base to build on”.

Another factor that GFMS see as significant to the rally was the shift in the official sector to net purchasing in the first half, a development chiefly attributable to the collapse in selling by signatories to the Central Bank Gold Agreement. Klapwijk noted that, “The material contribution from central banks’ net buying of around 90 tonnes in the first half was itself useful. But arguably of more importance was the broader shift in sentiment - investors for instance could be more confident of solid price gains, knowing central banks were in a sense on their side”.

A key element of the Update and the presentation is GFMS’ views on where the gold market might be heading and, on that score, the consultancy remains relatively bullish, with Klapwijk adding, “I think we could easily see gold spike comfortably above $1300 before the year’s out. We’ll probably get a fair bit of profit taking as we head into the New Year but I wouldn’t take that as a sign that the party’s over - further gains in 2011 are far from out of the question”.

Going Out with a Bang: Americans Using Credit Cards They Can’t Pay Back

By Mac Slavo: As usual, Schiff is a bull on gold and precious metals commenting that silver "is going a lot higher." Though he didn’t have a specific number in mind, he sees a likely and continued uptrend that can reach levels much higher than where it is today. "I think silver is going to go, ultimately, fifty dollars an ounce, a hundred dollars an ounce, who knows how high it can go?" forecasts Schiff.

When asked what sort of time frame he expects for silver to reach these levels, Schiff’s response closely mirrors our own view on when we can expect a significant move in precious metals and other essential commodities like food and energy:

It could happen very soon. It all depends, I think, on when you really have a collapse in the dollar. I think the dollar index, which is trading a little bit above 80, I think it’s headed down to 40. Whether it gets there in two years, three years, I don’t know. It just depends on when the world wakes up and figures out what’s going on. I mean the United States right now is completely powerless to prevent runaway inflation.

It is our view that not only have the major powers in the world like China, Russia and Europe woken up, but they are very well aware of what is going on. The Europeans, whose banks are closely allied with those in the United States may get slammed just as hard as US banks. And the Dollar and the Euro could very well see the same fate over the course of the next decade, which, in our view, would essentially be a complete destruction of their value in terms of buying on

Five-fold rise in gold price 'is not a bubble', claims industry body

By Mark Leftly - UK Independent: World Gold Council says its research proves the 10-year bull market is no illusion

The gold price surge, which saw the precious metal reach record highs last week, will not turn into a bubble that will burst, says a new report.

The World Gold Council looked at previous bubbles, where prices rapidly surged and then just as quickly collapsed, such as the dotcom boom of the late 1990s and the US housing collapse of 2006-07.

Statisticians found that such bubbles followed similar patterns, mainly defined by two unusual spikes in prices. Although the gold price hit a record $1,280 per troy ounce earlier this week, the price increases have followed a relatively stable course.

The council researched the 10-year bull gold market in a perspective report after central bankers expressed concern that the price, which has increased five-fold in less than a decade, might be unsustainable.

George Milling-Stanley, the council's managing director of government affairs, said: "As we looked at various bubbles across the world we found that gold was not in a bubble. There is also a case for optimism [for continuing price growth] because of the strength of emerging market economies that are consuming more and more gold."

Central banks have also been net sellers of gold for the past 20 years, but increasingly they are buying more than they shed. These factors and the new uses being found for gold in technology as an electrical conductor mean that it should continue its growth.

Co-author Ashish Bhatia said: "Adjusted for inflation, the real level of the gold price has not even reached that seen in the 1980s."

The start of that decade was the last time a gold bubble existed. The price had then soared partly as a consequence of geo-political events, such as oil price hikes and the Soviet Union's invasion of Afghanistan, which led investors to put their money in assets typically considered safe havens.

The report concluded: "Unambiguously, the results showed that gold price developments do not resemble statistical characteristics of past bubbles. Furthermore, we demonstrated that there is ample scope for continued robust growth in gold market demand."

Do Huge Volumes For Gold Indicate More Upside?

By P. Radomski: Gold prices are rising from the long-term perspective and it's no wonder. Central banks that had one time liked nothing better than to get rid of their gold reserves, are amassing major gold positions. The International Monetary Fund said last week that it sold 10 metric tons of gold to the central bank of Bangladesh raising $403 million. The IMF has already sold 212 tons of gold to the Reserve Bank of India, the Bank of Mauritius and the central bank of Sri Lanka, all in November last year.

So far in 2010 Russia has increased its gold holdings by 2.8 million ounces, $3.6 billion at current prices giving the Russian government a total of almost $30 billion. Saudi Arabia and the Philippines have disclosed new gold buying in 2010, plus India, Sri Lanka and Mauritius bought gold in 2009. We know that the People's Bank of China is also is a major accumulator of gold, gobbling up its local mining production in hopes of having a hedge for its huge mountain of fiat currency reserves.

It seems that demand for gold is rising faster than supply. Mine production has remained flat even as investor demand more than doubled so far in 2010 compared to a year earlier.

Looking back at recent history the best year for mine production was in 1999 when 83.69 million ounces of new gold came out of the ground. Keep in mind that in that year the price of gold was under $300, hitting a low of $256. (That was the year that the luckless former British Prime Minister Gordon Brown ordered the sale of Britain's gold reserves.) on